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Fannie Mae & Freddie Mac Mortgages, Announcements & Scandals

The government, as a whole, has dealt with entirely too many scandals in recent weeks and months. The fact that we come across the story that was “breaking news” a week ago and realize it just fell off of the media’s radar in lieu of a newer scandal forces all of us to rethink the way both political and financial decisions are made in this country. Both Fannie Mae and Freddie Mac made huge announcements this week, but not without even more scandal that seemingly overshadows that brighter news. What’s next?

Fannie Mae and Freddie Mac

It’s important to remember that both government agencies – Fannie Mae and Freddie Mac – are funded by tax dollars. That should provide a bit of perspective; that, and the fact that they accepted taxpayer bailouts in 2008, but are turning massive profits these days. The agencies are saying that they singlehandedly helped prevent more than 130,000 foreclosures during the first three months of 2013. That now brings the total to 2.8 million since the government’s takeover in 2008.

The millions of American homeowners are still in their homes because of the two agencies “acted fast”. In fact, more than half applied for the programs and the approval rates were high. Half of those homeowners were able to take advantage of a permanent mortgage reduction and are part of the Federal Housing Finance Agency’s first quarter reports. As a result, serious delinquencies fell from 3.3 percent in 2012 fourth quarter to 3.0 percent in the first quarter of 2013. For those who were late 60 days, they too saw rates declining and those numbers were even more impressive. Eleven percentage points was the difference during the same time frame.

Other Details

Other highlights of the report include:

  • More than a third of loan modifications completed between January and March 2013 included principal forbearance.
  • Another 30,000 short sales were completed, which now brings it to more than 475,000 similar solutions since the programs began in 2008.
  • Both third party sales and foreclosure sales continue to trend down; however, foreclosures are on the way back up.

Fannie Mae Scandals

While most of this is certainly good news, it’s difficult to not temper it with the scandals. James Tiegen, an executive with Fannie Mae, was fired in late June due to a new FBI investigation that alleges kickbacks from realtors. The federal housing agency says he’s not suspected of criminal behavior, though. He was indicted in recent days on charges of soliciting illegal payments from a real estate broker. One whistleblower says these types of actions occurred on a regular basis and now the FBI is looking deeper in an effort of discerning if any other employees were involved.

Tiegen was the vice president of the Irvine, Texas office. The role of that particular office included selling foreclosed properties. While Fannie says it doesn’t believe he acted in a criminal manner, many question that. Fannie has simply called his termination as necessary due to “performance issues”.

It appears he’s dropped off the face of the earth, too as he’s not taking calls, answer his door and his former co-workers say they haven’t spoken to him either. Even if they knew, they all said they were barred from commenting to the media due to the “personal and legal” implications. The standard, “We don’t allow wrongdoing” and “our controls and procedures are in place to combat criminal activity and any type of fraud” was released to the media after Tiegen’s arrest.

This isn’t the end of the story, though. In fact, another one-time specialist was arrested in early March.

He’s been charged with accepting money for providing entire listings to one broker, who then promptly turned Armando Granillo over to the federal government. Granillo allegedly told the broker that kickbacks were a “natural part” of doing business with the government. When he was arrested, he still had more than $11,000 in cash, a big part of the bribe, in his wallet. He’s due in court later this summer to stand trial.

Meanwhile, when one of Tiegen’s co-workers was interviewed, she said the kickbacks were “widespread” and that she was fired when she tried to blow the whistle on several of those in her office, including Tiegen. She’s sued Fannie Mae, though her lawyer says they’ve not heard from the agency.

“When we determine that our controls can be strengthened further, we implement changes,” the statement said.

For example, we have changed our property assignment process so that our sales associates will not make assignments to brokers, reducing the potential for conflicts of interest.

The solution its proposed sounds good, but whether the agency can carry it out remains to be seen. The Dallas office is now in charge of “curtailing the likelihood of kickback demands”. It also assigns various listings of foreclosed properties to the brokers themselves. That wasn’t always the case, though. In the past, these assignments were handled and doled out on the regional level. There were 50 of those employees who worked in Tiegen’s office. As a result, those employees had a few of their responsibilities stripped. They now only manage the foreclosed properties and sales that were assigned to them from another office.

Fed Up With the Fed

Of course, no agency – public or private – is perfect. Human nature means folks sometimes lose sight of their priorities. Frankly, there are those who give a black eye to the government agency or private employer when they’re found to have acted outside the limits of the law. It reflects badly on that company or agency and too many times, the employers are the last ones to know. But when the scandals are occurring on a weekly or even daily basis and when government credit cards – paid by tax dollars- are used to finance extravagant getaways and ridiculous purchases, the lines begin to blur and before long, those on the outside looking in don’t care about the logistics: they want the individuals and the agency or company to pay up. For American consumers, that day has arrived yet again.

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