CBNC is reporting that Congress is seeking information as to why Fannie Mae and Freddie Mac have charged “penalties” adding up to about $150 million for “failing to conduct foreclosures fast enough.” Congressman Elijah Cummings, in an open letter to Fannie Mae and Freddie Mac, expressed serious concerns that these massive penalties may have contributed to widespread abuses by mortgage servicing companies and law firms attempting to meet arbitrary deadlines to expedite foreclosures.
As a foreclosure defense attorney, I have am troubled by these massive penalties. Many foreclosure cases that I’ve handled have turned up glaring errors made by banks, servicers, and the lawyers who defend them. In some instances, home loans are sold and assigned by parties who have no interest in them. In most cases involving securitization of loans, there are blatant misrepresentations made either to the local county clerks where mortgages are publically recorded, or to the U.S. Securities and Exchange Commission, which regulates the securitization industry. When I point out these mistakes to banks and their lawyers, I’m usually greeted with indifference or flat out denial. Fannie Mae in particular, in my recent experience, has been especially resistant to working with homeowners.
Perhaps now I know why. Servicers and foreclosure attorneys might rather face the wrath of the court for a wrongful foreclosure or an angry homeowner than a monetary penalty from Fannie Mae or Freddie Mac for not foreclosing fast enough. After all, they can claim they “were just following orders” if they acted improperly.
This underscores my mantra to homeowners–take control of your own destiny. Don’t assume that the bank or servicers, or their lawyers, are actually trying to help you keep your home–even if they are working with you on a modification. As highlighted by the CNBC report, there may be another motive behind their actions–keeping up with a pre-set foreclosure pace to avoid fines and penalties.