FYI: Fannie and Freddie have issued policy review directives to their seller/servicers on following proper procedure in the foreclosure process.
While I don't see these bulletins as anything besides another wake up call for back shop operations managers and servicing staff, we can't forget the PR mess this is becoming for Fannie, Freddie and the FHFA. The GSEs want/need this issue squashed as quickly and cleanly as possible so they can move on with the disposition of their REO inventory. In the end, homeowners agreed to pay their mortgage, if they didn't pay their mortgage, they should be foreclosed on (whether or not consumers feel like a bank "screwed" them is not the point. Sorry for the bluntness but this is the plain and simple view in the here and now.)
Unfortunately this won't do much to speed up foreclosure turn times. This debacle will only further slow the pace of the housing recovery as banks delay foreclosures and potential new buyers put off purchasing plans until legal technicalities are worked out and more clarity arises on the outlook for home prices (some clarity is better than none).
Issues have recently arisen with respect to potential defects with affidavits submitted by servicers in support of motions for summary judgment in states with judicial foreclosure processes. The issues pertain to whether the individuals executing the affidavits on behalf of the servicer had the required personal knowledge of the information contained in the affidavits and whether the affidavits were notarized in accordance with applicable requirements.
Fannie Mae is directing all of its servicers to immediately undertake a review of their policies and procedures relating to the execution of affidavits, verifications, and other legal documents in connection with the default process. If the servicer has any concerns with its policies and procedures or their implementation, the servicer must advise its legal counsel to contact Fannie Mae in writing immediately via e-mail to email@example.com.
Fannie Mae is also taking this opportunity to emphasize the application of existing Mortgage Selling and Servicing Contract (the Contract) and Servicing Guide provisions with regard to the following:
- Servicer's basic duties and responsibilities
- Compliance with applicable laws and mortgage documents
- Servicer's audit and control systems
- Consequences of non-performance of servicer’s duties and responsibilities and non-compliance with applicable laws and mortgage documents
Freddie Mac is deeply concerned by recent news articles which report that affidavits used in foreclosure proceedings may have been executed inappropriately and without proper notarization. The practices described in these reports violate both applicable law and Freddie Mac’s contractual Servicing requirements as set forth in the Freddie Mac Single-Family Seller/Servicer Guide (“Guide”).
Through this Industry Letter, Freddie Mac seeks to reinforce our commitment to safeguarding the legal rights of Borrowers. We are also reaffirming our focus on protecting the integrity of the foreclosure process. Accordingly, Freddie Mac is requiring Servicers to review their Servicing operations to verify the adequacy of their processes regarding the execution of affidavits and to notify Freddie Mac of any identified deficiencies.
Rob Chrisman discusses how this is affecting title companies: READ MORE