The regulator of Fannie Mae and Freddie Mac has created a framework for the two secondary lenders and their respective servicers to utilize as they sift through foreclosure cases for faulty affidavits.
A four-point policy framework was unveiled Wednesday by Federal Housing Finance Agency Acting Director Edward J. DeMarco. The regulator’s plan includes “guidance for consistent remediation of identified foreclosure process deficiencies.”
The director noted that other financial regulators were closely consulted in the development of the framework.
The government-controlled enterprises were already working with their respective servicers as of an Oct. 1 announcement, FHFA said. But additional servicers have since disclosed problems in their processes — increasing public concern and prompting the new policy.
The first point was identified as the “verify process,” where servicers review processes and procedures and verify that documents, including affidavits and verifications, are in legal compliance.
When a deficiency is identified with the affidavit or notary process, the servicer must analyze filed affidavits in pre-judgment foreclosure actions and work with foreclosure counsel to resolve non-compliant affidavits, according to the second point. On pre-judgment foreclosure actions, this might include “preparing and filing a properly prepared and executed replacement affidavit before proceeding to judgment.”
On post-judgment foreclosure actions prior to foreclosure sale, foreclosure counsel must also be sought while possible remedies might encompass “filing an appropriate motion to substitute a properly completed replacement affidavit with the court and to ratify or amend the foreclosure judgment.”
In the case where a foreclosure has occurred and Fannie or Freddie own the property, FHFA said the solution might involve submitting an order to substitute a good affidavit for the bad one while ratifying the foreclosure judgement or confirming the foreclosure sale. On REO sales, the two agencies are required to make sure title insurance can be purchased on behalf of the buyer.
If a bankruptcy is involved, servicers need to seek bankruptcy counsel.
The third point is to report activity that might involve fraud, while the fourth point calls for avoiding any possible delays in foreclosures where no issues have been identified.
“This framework envisions an orderly and expeditious resolution of foreclosure process issues that will provide greater certainty to homeowners, lenders, investors, and communities alike,” DeMarco stated. “The country’s housing finance system remains fragile, and I intend to maintain our focus on addressing this issue in a manner that is fair to delinquent households, but also fair to servicers, mortgage investors, neighborhoods and most of all, is in the best interest of taxpayers and housing markets.”
