Foreclosure drama hits Fannie, Freddie
The companies must delay foreclosure cases as the document crisis expands.
Foreclosures have ground to a halt at some big banks. Forged documents are coming to light. Prosecutors in all 50 states are investigating improper procedures.
Fannie and Freddie have been able to avoid the drama -- until now. They're feeling some heat for using a Florida law firm accused of forging paperwork and backdating documents.
Fannie and Freddie have told mortgage servicers to stop sending cases to the firm, according to The Wall Street Journal. And they've hired lawyers to review the work the firm was processing.
This could get messy because the Florida law firm was a favorite of Fannie. The firm's owner was named attorney of they year by Fannie in 1998 and 1999, the Journal reports. Post continues after video:
The firm handled 70,000 foreclosures last year. If the allegations are true, how many of those are now up in the air?
With that law firm out of the equation, Fannie and Freddie are likely going to see delays on their foreclosed properties. One analyst told the Journal that if all foreclosures are delayed for three months, then Fannie, Freddie and other government agencies could suffer about $3 billion in losses.
"The final losses for Fannie and Freddie will be more expensive than we anticipated," said the analyst, who works for FBR Capital Markets.
Who will pay for the additional losses? Fannie and Freddie have already received nearly $150 billion from the federal government in the financial crisis.
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