Just last week, Ally Financial halted its foreclosure process in 23 states because of allegations into problems with their foreclosures, which are handled by the same firms that these lawmakers say are being used by Fannie Mae (aka Federal National Mortgage Association or FNMA). An Ally employee testified in a Florida case that hundreds of thousands of foreclosure documents were not independently verified. Yesterday, JPMorgan Chase announced that it was suspending 56,000 foreclosure cases for similar reasons. Since Florida's Supreme Court won't intercede, some foreclosures will go forward, even though the documentation may be flawed.
While Florida says it can't act, some states are halting Ally's foreclosures, including California and Connecticut. Attorneys general in Iowa, North Carolina and Texas also opened investigations into Ally. Homeowners facing foreclosure, meanwhile, might need to explore their legal options.
But Ally is not alone, and the members of Congress point out that the same law firms involved in the Ally fiasco remain on the list of Fannie Mae's Retained Attorney Network. Reps. Alan Grayson (D-Fla.), Barney Frank (D-Mass.) and Corrine Brown (D-Fla.) asked the president and CEO of Fannie Mae, Michael J. Williams, to answer these questions:
- Given that Fannie Mae is at this point a government entity, and it is the policy of the government that foreclosures are a costly situation best avoided if there are any lower-cost alternatives, what steps is Fannie Mae taking to avoid the use of foreclosure mills?
- What additional steps is Fannie Mae going to take to ensure that foreclosures are done only when necessary and only in accordance with recognized law?
- Why is Fannie Mae using lawyers that are accused of regularly engaging in fraud to kick people out of their homes?
The Florida attorney general's office says it doesn't have the power to investigate banks, but it has started an investigation into the law practices. The firms under investigation include Shapiro & Fishman, the law offices of Marchall C. Watson and of David J. Stern, and the Florida Default Law Group. Essential How-To Guides on AOL Real Estate: Home Buying, Selling, Renting, Moving and Home Improvement Shapiro & Fishman object to the investigation and filed a motion to quash a subpoena for information. Stern's office turned over 27,000 pages of documents requested by the state. The other two law groups have not been available for comment.
The members of Congress said in their letter that, "The legal pressure to foreclose at all costs is leading to a situation where servicers are foreclosing on properties on which they do not even own the note." They want Fannie Mae to institute "guidelines allowing servicers to proceed on foreclosure only when its legal entitlement to foreclose is clearly documented." They also asked Fannie Mae to "remove foreclosure mills under investigation for document fraud from the Fannie Mae's Retained Attorney Network."
So what does all this mean for you? If you're facing foreclosure, seek legal help to be sure that all your documentation is valid. A court can only act on false documentation if it is made aware that the documentation is fraudulent. You need an attorney to help you make the argument in court. You can seek help through the Institute for Foreclosure Legal Assistance.
Lita Epstein has written more than 25 books including "The 250 Questions You Should Ask to Avoid Foreclosure" and "The Complete Idiot's Guide to Personal Bankruptcy."
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