The role of Fannie Mae and Freddie Mac in the foreclosure fiasco has been largely overlooked-until now. The Washington Post weighs in with a thoughtful look at how they "shaped the practices being challenged in courtrooms around the country. They picked law firms that could foreclose fast and paid them based on how many foreclosures they could process." This led to problems.

In at least one case Fannie executives "greenlighted working with a firm that they knew firsthand had engaged in legally questionable practices." That firm was the Law Offices of David J. Stern in Florida, which has gained notoriety in the wake of the foreclosure fiasco and has been nixed as a vendor by several big banks.

This is an important new wrinkle in the public discussion. It may provide a measure of cover for embattled banks and mortgage servicers--to the extent that Fannie and Freddie, which dictate a lot of industry best practices, were pushing to foreclose quickly. In one proceeding, "a Fannie executive was asked if the GSE had any safeguards to ensure that law firms, rushing to foreclosure, followed the law? 'I don't know of any policies and procedures,' she answered," notes the Post.

So, this may well emerge as an issue in the ongoing probe of lenders and services. Florida is apparently taking a close look at the role of the GSEs.

For more:
- here's the article

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