Federal Housing Finance Agency, Office of Inspector General, FHFA-OIG

IG Michael P. Stephens

Federal Housing Finance Agency (FHFA)
Office of Inspector General (OIG)

Michael P. Stephens, Principal Deputy Inspector General
and Acting Inspector General

The FHFA OIG is established by law to provide independent and objective reporting to the FHFA Director, Congress, and the American people through its audit and investigative activities.

FHFA OIG’s mission is to promote the economy, efficiency, and effectiveness of FHFA’s programs; to prevent and detect fraud, waste, and abuse in FHFA’s programs; and to seek sanctions and prosecutions against those who are responsible for such fraud, waste, and abuse.

The Housing and Economic Recovery Act of 2008 established an Office of Inspector General (OIG) within the Federal Housing Finance Agency (FHFA). The Inspector General Act of 1978, as amended, sets forth the functions and authorities of the FHFA OIG.

Note: Steve A. Linick was appointed as the Inspector General for the U.S. Department of State and the Broadcasting Board of Governors in September 2013. Prior to this appointment, he served for three years as the first Inspector General of the Federal Housing Finance Agency (2010-2013). As Inspector General, Mr. Linick is the senior official responsible for audits, inspections, investigations, and other law enforcement efforts to combat fraud, waste, and abuse within or affecting the operations of the Department of State and the Broadcasting Board of Governors. Read more on DiploPundit.net
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Rep. Cummings

U.S. Congressman Elijah Cummings, Maryland's 7th District, is a
Ranking Member of the United States House Committee on Oversight and Government Reform, see Wikipedia here and here

McCalla Raymer LLC is one foreclosure mill cited in a letter by U.S. Congressman Elijah Cummings to Steve Linick, Inspector General of the Federal Housing Finance Agency, asking for an "investigation into widespread allegations of abuse by private attorneys and law firms hired to process foreclosures as part of the "Retained Attorney Network" established by Fannie Mae."

Congressman Cummings cited the following Florida foreclosure firms or processors in his letter,

Law Offices of David J. Stern, P.A.
Law Offices of Marshall C. Watson, P.A.
Shapiro & Fishnlan, L.L.P.
McCalla Raymer, L.L.C.
Lender Processing Services, Inc.

The New York Times quoted Congressman Cummings in a statement, "As a member of Congress and an attorney, I find the systemic failures by F.H.F.A. and Fannie Mae to adequately oversee these foreclosure law firms to be a breach of the public trust and an assault on the integrity of our justice system."

Inspector General Linick’s 35 page report refers to a 2006 Report to Fannie Mae of Foreclosure Abuses in Florida,

"In December of 2003, a Fannie Mae shareholder began alerting Fannie Mae to foreclosure abuse allegations, and in 2005 Fannie Mae hired an outside law firm to investigate a variety of allegations regarding purported foreclosure processing abuses. In May 2006, the law firm issued a report of investigation in which it found that:"

"[F]oreclosure attorneys in Florida are routinely filing false pleadings and affidavits…. The practice could be occurring elsewhere. It is axiomatic that the practice is improper and should be stopped. Fannie Mae has not authorized this unlawful conduct."

"Further, the report observed that Fannie Mae did not take steps to ensure the quality of its foreclosure attorneys’ conduct, the legal positions taken in the attorneys’ pleadings, or the manner in which the attorneys processed foreclosures on the Enterprise’s behalf."

Managing partner Robyn Katz of McCalla Raymer is a former attorney employed by the Law Offices of David J. Stern. Mr. Stern has been disbarred, but I am not aware of discipline for his many attorney-accomplices, who include Ms. Katz.

Unfortunately foreclosure mills are not held accountable in any meaningful way in Florida. The Florida Supreme Court disbarred David J. Stern but did impose any meaningful discipline, no fine or penalty, only judgment entered for The Florida Bar "for recovery of costs from David James Stern in the amount of $49,125.02". As divided by the 100,000 foreclosure cases Mr. Stern abandoned, that amounts to 49 cents per case.

Mr. Stern gets to keep a $58.5 million cash windfall for the sale of his back-office document preparation services, according to the Palm Beach Post.

There was no justice for homeowners wrongly foreclosed by David J. Stern Enterprises (DJSE).
There was no Florida Attorney General criminal prosecution of Mr. Stern or DJSE.

Florida Supreme Court gave David J. Stern a sweetheart deal: 49 cents per 100,000 abandoned foreclosure cases, which The Bar’s Referee Nancy Perez wrote "created chaos on the courts of the state of Florida, prejudicing the whole system as a whole." (page 4, Report of Referee SC13-643). Any number of attorneys would gladly consent to disbarment in exchange for a $58.5 million cash windfall regardless of the circumstances.

The Florida Supreme Court Order SC13-643 is an embarrassment to the rule of law, signed "POLSTON, C.J., and PARIENTE, LEWIS, QUINCE, CANADY, LABARGA, and PERRY, JJ., concur" who approved a 49 cents per case settlement in the disbarment of Mr. Stern. (Florida Bar Complaint for David J. Stern)
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Fannie Mae Knew Early of Abuses, Report Says
The New York Times
By GRETCHEN MORGENSON
October 3, 2011

Fannie Mae, the mortgage finance giant, learned as early as 2003 of extensive foreclosure abuses among the law firms it had hired to remove troubled borrowers from their homes. But the company did little to correct the firms’ practices, according to a report issued Tuesday.

Only after news reports in mid-2010 began to describe the dubious practices, like the routine filing of false pleadings in bankruptcy courts, did Fannie Mae’s overseer start to scrutinize the conduct. The report was critical of that overseer, the Federal Housing Finance Agency, and was prepared by the agency’s inspector general.

In one notable lapse, even after the agency reported problems to Fannie Mae in late 2010 about some of the approved law firms, it did not request a response from the company, the report said.

"American homeowners have been struggling with the effects of the housing finance crisis for several years, and they shouldn’t have to worry whether they will be victims of foreclosure abuse," said Steve Linick, inspector general of the finance agency. "Increased oversight by F.H.F.A. could help to prevent these abuses."

The report is the second in two weeks in which the inspector general has outlined lapses at both the Federal Housing Finance Agency and the companies it oversees — Fannie Mae and Freddie Mac. The agency has acted as conservator for the companies since they were taken over by the government in 2008. Its duty is to ensure that their operations do not pose additional risk to the taxpayers who now own them. The companies have tapped the taxpayers to cover mortgage losses totaling about $160 billion.

Elijah E. Cummings, the Maryland Democrat who is the ranking member of the House Committee on Oversight and Government Reform and who requested the inspector general’s report, said in a statement, "As a member of Congress and an attorney, I find the systemic failures by F.H.F.A. and Fannie Mae to adequately oversee these foreclosure law firms to be a breach of the public trust and an assault on the integrity of our justice system."

The new report from the inspector general tracks Fannie Mae’s dealings with the law firms handling its foreclosures from 1997, when the company created its so-called retained attorney network. At the time, Fannie Mae was a highly profitable and powerful institution, and it devised the legal network to ensure that borrower defaults would be resolved with efficiency and speed.

The law firms in the network agreed to a flat-rate fee structure and pricing model based on the volume of foreclosures they completed. The companies that serviced the loans for Fannie Mae, were supposed to monitor the law firms’ performance and practices, the report noted

After receiving information from a shareholder in 2003 about foreclosure abuses by its law firms, Fannie Mae assigned its outside counsel to investigate, according to the report. That law firm concluded in a 2006 analysis that "foreclosure attorneys in Florida are routinely filing false pleadings and affidavits," and that the practice could be occurring elsewhere. "It is axiomatic that the practice is improper and should be stopped," the law firm said.

The inspector general’s report said that it could not be determined whether Fannie Mae had alerted its regulator, then the Office of Federal Housing Enterprise Oversight, to the legal improprieties identified by its internal investigation.

Amy Bonitatibus, a Fannie Mae spokeswoman, declined to comment on the inspector general’s report, but said that the 2006 legal analysis identified a specific issue with the practice of filing lost-note affidavits, which the company immediately addressed.

The inspector general said that both Fannie Mae and its regulator appear to have ignored other signs of problems in their foreclosure operations. For example, the Federal Housing Finance Agency did not respond to borrower complaints about improper actions taken by law firms in foreclosures received as early as August 2009, even though foreclosure abuse poses operational and financial risks to Fannie Mae.

Nevertheless, a few months later and just before its takeover by the government, Fannie Mae began requiring the banks that serviced its loans to use only those law firms that were in its network. By then, 140 law firms in 31 jurisdictions were in the group. Among the largest firms in the network was the David J. Stern firm in Plantation, Fla., which was handling more than 75,000 foreclosure actions a year before Fannie Mae terminated it because of vast problems with its legal work.

Finally last fall, after an outcry over apparently forged foreclosure documents and other improprieties, the Federal Housing Finance Agency began investigating the company’s process. In a report issued early this year, it determined that Fannie Mae’s management of its network of lawyers did not meet safety and soundness standards. Among the reasons: the company’s controls to prevent or detect foreclosure abuses were inadequate, as was the company’s monitoring of the law firms. "If a law firm self-reported no issues as it processed cases," the inspector general said, "then Fannie Mae presumed the firm was doing a good job."

The agency is still deciding how to handle the lawyer network, the inspector general said.

Mr. Cummings has asked the federal housing agency to consider terminating the program.

Officials at the housing agency agreed, however, with the recommendations in the inspector general’s report. Corinne Russell, a spokeswoman for F.H.F.A. said the agency was concluding its supervisory work in this area and would direct Fannie Mae to take necessary action when the work was completed.

In a response, the agency said that by Sept. 29, 2012, it would review its existing supervisory practices and act to resolve "deficiencies in the management of risks associated with default-related legal services vendors." Read more
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Shortcuts on the foreclosure paper trail
Herald-Tribune
By Todd Ruger
November 28, 2010

To get a sense of the lawlessness in Florida's court-run foreclosure process, look no further than public records at the Sarasota and Manatee county courthouses.

There, on foreclosure documents open to everyone, is the evidence that at least one law firm's employees repeatedly broke a state law in a rush to push cases through the courthouse so banks could seize people's homes.

The evidence -- missing signatures and misdated documents that could not have been signed on the dates specified -- can be found on an important document called a "mortgage assignment." The paperwork helps prove a lender has the legal right to seize a property.

Without it, a bank would have a costlier and more time-consuming legal path to foreclose, even if a homeowner never makes another mortgage payment.

Faced with that prospect, employees in David J. Stern's law offices bent and broke the rules designed to ensure the documents judges rely on to award foreclosures are authentic, a Herald-Tribune investigation found.

The Plantantion-based firm, one of the state's largest foreclosure practices and a key player in local foreclosure cases, generated dozens of error-filled mortgage assignments in Sarasota and Manatee counties alone. In each case, the firm's employees notarized the documents, swearing they were accurate when they were not.

Stern's attorney and his employees have repeatedly told state investigators and reporters that mistakes on the paperwork they generated were just that -- unintentional and isolated errors. Read more