FHFA Inspector-General: Fannie Mae & Freddie Mac Improperly Foreclosed on Homeowners, Cost Gov’t Billions
A U.S. government watchdog has found that mortgage giants Fannie Mae and Freddie Mac improperly foreclosed on homeowners and cost the federal government billions of dollars due to lax adherence to underwriting requirements.
According to the Associated Press, a report from the Federal Housing Finance Agency (FHFA) Inspector-General found that the agency gave “undue deference” to officials at the two mortgage giants and failed to properly scrutinize $35 million in Fannie and Freddie executive compensation.
Fannie and Freddie, which own or guarantee around half of all U.S. mortgages– some 31 million loans– was seized by the Bush administration in 2008. The two lenders were guilty of lowering their standards during the 2000s housing boom; like the banks that are the target of so much ire, they failed to sufficiently check the income and assets of potential borrowers. They also sold high-interest loans with deceptively low introductory rates to high-risk customers.
- Fannie Mae was aware of allegations of improper foreclosure practices by law firms back in 2003 but did nothing to stop them.
- Fannie also failed to establish an “acceptable and effective” manner in which to monitor foreclosures between 2006 and 2011.
- FHFA failed to supervise the federal government’s Home Affordable Modification Program, a foreclosure-prevention program.