California Attorney General Kamala Harris is going after Fannie Mae and Freddie Mac, recently subpoenaing the mortgage giants in order to get a better look at their foreclosure practices. (Getty Images)
By JANIS BOWDLER
Last week, California Attorney General Kamala Harris subpoenaed Fannie Mae and Freddie Mac for information on their foreclosure proceedings in her state. While it is too early to say what will come of the subpoena, Harris’ attention to the role of Fannie and Freddie in stemming our foreclosure crisis is a breath of fresh air.
Fannie, Freddie, and their regulator―the Federal Housing Finance Agency (FHFA), led by Acting Director Ed DeMarco―have refused to implement widely accepted servicing best practices, such as stopping foreclosure proceedings until it can be determined whether a family is eligible for a modification or reducing principal balances. In fact, Fannie and Freddie actually fine banks that do not foreclose on homeowners quickly enough.
DeMarco’s disregard for home-saving solutions has serious ramifications. Fannie and Freddie own the majority of loans processed by the largest servicers. For example, they are investors in 60% of the loans serviced by Bank of America and in two-thirds of the loans serviced by Wells Fargo. Since Fannie and Freddie own the loans, they dictate the terms on which servicers collect payments, offer modification, and start foreclosures.