Fannie Mae and Freddie Mac have told mortgage servicers to immediately review their policies and procedures related to the execution of affidavits, verifications and other legal documents in the foreclosure process.
Responding to reports that at least three mortgage servicers — Ally Financial Inc.'s GMAC Mortgage, JPMorgan Chase & Co. and Bank of America Corp. — were delaying foreclosures while investigating potential defects in the processing of court documents, the government-sponsored enterprises said late Friday that servicers needed to take action to strengthen their review and due diligence processes. Freddie set an Oct. 18 deadline for servicers to conduct reviews.
"Freddie Mac is deeply concerned about recent reports that there may be affidavits that were improperly executed in connection with foreclosures," Bruce Witherell, Freddie's chief operating officer, said in a statement. "The alleged practices in these reports are clearly not in compliance with Freddie Mac's guidelines and directives to servicers."
The servicers have acknowledged that some employees signed affidavits without having personal knowledge of the information.
Fannie said in its letter to servicers that they must have sufficient and properly trained staff, adequate controls and quality-assurance procedures in place. In addition, Fannie said servicers must contact its legal counsel if any routine legal proceeding becomes contested, or if the servicer receives a notice of a non-routine action that involves a Fannie-owned or securitized mortgage loan that would affect Fannie's interests.
Both GSEs said they can pursue a varity of remedies against servicers who do not comply, including requiring corrective action, charging compensatory fees, requiring that the lender indemnify them for losses, or terminating a servicer's contract for a failure "to take diligent action consistent with applicable law."