Fannie Mae was repeatedly warned about mortgage and foreclosure fraud - years before their financial collapse - but did absolutely nothing to stop it.
Like most people, Nye Lavalle had little interest in the mortgage industry until things got personal. Raised in comfortable surroundings in Grosse Pointe, Mich., just outside Detroit, he began his business career in the 1970s, managing professional tennis players. In the 1980s, he ran SMG, a thriving consulting and research firm.
Then he tried to pay off a loan on a home his family had bought in Dallas in 1988. The balance was roughly $100,000, and the property was valued at about $175,000, Mr. Lavalle said. But when he combed through figures provided by his lender, Savings of America, he found substantial discrepancies in the accounting that had inflated his bill by $18,000. The loan servicer had repeatedly charged him late fees for payments he had made on time, as well as for unnecessary appraisals and force-placed hazard insurance, he said.
Mr. Lavalle refused to pay. The bank refused to bend. The balance rose as the bank tacked on lawyers’ fees and the loan was deemed delinquent. The fight continued after his mortgage was allegedly sold to EMC, a Bear Stearns unit.
Unlike most people, Mr. Lavalle had the time and money to fight. He persuaded his family to help him pay for a lawsuit against EMC and Bear Stearns. Seven years and a small fortune later, they lost the house in Dallas. Back then, judges weren’t as interested in mortgage practices as some are now, he said.
...Mr. Lavalle pointed out legal lapses by some of its representatives. Among them was the law offices of David J. Stern, in Plantation, Fla., which was handling an astonishing 75,000 foreclosure cases a year — more than 200 a day. In 2005, Mr. Lavalle warned Fannie Mae that some judges had ruled that the Stern firm was submitting “sham pleadings.” Nonetheless, Fannie continued to do business with the firm until it closed its doors last year, after evidence emerged of rampant forgeries and fraudulent filings.
O.C.J. Case No. 5595 found that Stern wasn’t the only firm working for Fannie that seemed to be cutting corners. It also found that lawyers operating in seven other states — Connecticut, Georgia, New York, Illinois, Louisiana, Kentucky and Ohio — had made false filings in connection with work for Fannie Mae or the Mortgage Electronic Registration System, or MERS, a private mortgage registry Fannie helped establish in 1995.
An attorney with Baker & Hostetler - a firm hired by Fannie Mae to investigate Mr. Lavelle's claims - Mark A. Cymrot, a partner who led the investigation disregarded Lavelle's warning that Fannie could stand to lose billions if misconduct by its lawyers and servicers led to substantial numbers of foreclosures needing to be undone.
The report simply concluded that not many people have the financial means to challenge a foreclosure, as Mr. Lavelle had, and that's where it ended. The mortgage giant counted on the average American being too broke to fight a foreclosure.
But one more shocking item from the report to note, "Mr. Lavalle warned Fannie years ago that MERS couldn’t legally foreclose because it didn’t actually own notes underlying properties." How's that for a kick in the pants from the mortgage giants that cost $150 billion of your hard-earned tax dollars?
Be sure to read the entire article at the New York Times.