Top House Democrat demands explanation of penalties for late foreclosures

A top House Democrat is questioning why government-controlled Fannie Mae and Freddie Mac charged mortgage servicers millions of dollars in penalties for not moving fast enough on foreclosures. 

House Overnight and Government Reform Committee ranking member Elijah Cummings (D-Md.) sent a letter Wednesday to Edward DeMarco, acting director of Federal Housing Finance Agency (FHFA), the regulator of Fannie and Freddie, requesting information about $150 million in fees the troubled mortgage giants charged mortgage servicing companies last year exceeding foreclosures timelines.

“I am concerned that these penalties, at least some of which were ordered by the Federal Housing Finance Agency (FHFA), may have contributed to widespread abuses by mortgage servicing companies and law firms attempting to meet arbitrary deadlines to expedite foreclosures,” Cummings wrote.

“The size and timing of these penalties, raise serious questions about whether FHFA may be more interested in expediting foreclosures to clear its books than protecting the rights of homeowners,” he wrote.

DeMarco and the top executives from Fannie and Freddie were testifying this morning before Cummings's panel to discuss millions in executive bonuses doled out last year. 

A Sept. 30 report released by the inspector general found that “there were multiple indicators of foreclosure abuse risk prior to 2010 that could have led FHFA to identify and act earlier on the issue.” 

Those indicators include “consumer complaints alleging improper foreclosures; contemporaneous media reports about foreclosure abuses by Fannie Mae’s law firms; and public court filings in Florida and elsewhere highlighting such abuses.” 

The IG report also mentioned a Fannie Mae review finding that foreclosure attorneys “are routinely filing false pleadings and affidavits.” 

A report by FHFA’s Office of Conservatorship Operations found that “servicers, attorneys, and other supporting personnel were overloaded with the volume of foreclosures ... documentation problems were evident, and law firms were not devoting the time necessary to their cases.”

Nevertheless, the IG reported that in 2010, FHFA “directed Fannie Mae to impose compensatory fees against the servicers for violating foreclosure timeline limits.”

Cummings originally asked DeMarco for information about these penalties on Oct. 3, and in Wednesday's letter he requested additional information on the penalties be sent to him by Nov. 30.