Elijah Cummings to Edward DeMarco

8/3/2019 Elijah Cummings to Edward DeMarco

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D A R R E L L E. I S S A , C A L I F O R N I AC H A I R M A N

O N E H U N D R E D T W E L F T H C O N G R E S S E L I J A H E. C U M M I N G S , M A R Y L A N DR A N K I N G M I N O R I T Y M E M B E R

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D I S T R I C T O F C O L U M B I AD E N N I S J . K U C I N I C H , O H I OJ O H N F. T I E R N E Y , M A S S A C H U S E T T SW M . L A C Y C L A Y , M I S S O U R IS T E P H E N F. L Y N C H , M A S S A C H U S E T T SJ I M C O O P E R , T E N N E S S E EG E R A L D E. C O N N O L L Y , V I R G I N I AM I K E Q U I G L E Y , I L L I N O I SD A N N Y K. D A V I S , I L L I N O I SB R U C E L. B R A L E Y , I O W AP E T E R W E L C H , V E R M O N TJ O H N A . Y A R M U T H , K E N T U C K YC H R I S T O P H E R S . M U R P H Y , C O N N E C T IJ A C K I E S P E I E R , C A L I F O R N I A

http://oversight.house.gov

L A W R E N C E J . B R A D YS T A F F D I R E C T O R November 16, 2011

M r . Edward DeMarcoActing DirectorFederal Housing Finance Agency1700 G Street NWWashington, D.C. 20551Dear Acting DirectorDeMarco:

I am wr i t ing to request additional information about $150 mil l ion in fees that Fannie Maeand Freddie Mac charged mortgage servicing companies in 2010 for fai l ing to conductforeclosures quickly enough to meet federally imposed timelines. I am concerned that thesepenalties, at least some of which were ordered by the Federal Housing Finance Agency (FHFA) ,may have contributed to widespread abuses by mortgage servicing companies and law f i rmsattempting to meet arbitrary deadlines to expedite foreclosures.

On February 25, 2011,1 launched a major investigation into abuses and illegal activitiesby mortgage servicing companies, including wrongful foreclosures, deficient recordkeeping,inflated fees, and fraud in lending. As part of this investigation, I wrote to the FHFA InspectorGeneral requesting an investigation into "widespread allegations of abuse by private attorneysand law f i rms hired to process foreclosures as part of the 'Retained Attorney Network'established by Fannie Mae."1

On September 30, 2011, the Inspector General issued a report in response to my requestconcluding that "there were multiple indicators of foreclosure abuse r isk prior to 2010 that couldhave led FH FA to identify and act earlier on the issue." According to the Inspector General,these warnings included "consumer complaints alleging improper foreclosures; contemporaneous

1 Letter f r o m Ranking Member Eli jah E. Cummings, House Committee on Oversight andGovernment Reform, to the Honorable Steve A. Lin ick , Inspector General, Federal HousingFinance Agency (Feb. 25, 2011) (online at http://democrats.oversight.house.gov/images/stories/Correspondence/Foreclosure%20Letters/Cummings0/o20Letter%20to%20FHFA%20IG.pdf).

Evidence of Abuses P r i o r to 2010


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M r . Edward DeMarcoPage2media reports about foreclosure abuses by Fannie Mae's law firms; and public court fi l ings inFlorida and elsewhere highlighting such abuses."2

In one instance, a review commissioned by Fannie Mae found that "foreclosure attorneysin Florida are routinely f i l ing false pleadings and affidavits." Similarly, in June 2010, officialsf r o m FHFA's Office of Conservatorship Operations performed a two-day f ie ld visit to Florida,after which they noted:

[SJervicers, attorneys, and other supporting personnel were overloaded with the volumeof foreclosures, the average timeline for foreclosures had increased f r o m 150 to 400 days,documentation problems were evident, and law firms (referred to as "foreclosure mil ls")were not devoting the time necessary to their cases due to Fannie Mae's f lat fee structureand volume-based processing model.3

Despite evidence of widespread problems among foreclosure law firms retained byFannie Mae and Freddie Mac, the Inspector General's report concluded that FHFA "d id notbegin to act on foreclosure abuse issues involving Fannie Mae's RA N u n t il mid-2010." TheInspector General recommended that FHFA review why it failed to heed these warnings sooner,implement comprehensive procedures to prevent these abuses in the future, and address "poorperformance" by law firms that have contractual relationships with Fannie Mae and FreddieMac. FHFA agreed with all of these recommendations.4

Penalties for Slow ForeclosuresIn addition to finding that there were multiple indicators of foreclosure abuse prior to

2010, the Inspector General reported that during this same timeframe in 2010, FHFA "directedFannie Mae to impose compensatory fees against the servicers for violating foreclosure timelinel im i t s . " 5

In fact, FHFA General Counsel Alf r e d M . Pollard disclosed in a letter to me onNovember 1, 2011, that Fannie Mae and Freddie Mac assessed penalties totalingapproximately$150 mil l ion in 2010. He wrote:

2 Federal Housing Finance Agency, Officeof Inspector General, FHFA's Oversight ofFannie Mae's Default-Related Legal Services (AUD-2011-004) (Sept. 30, 2011) (online atwww.fhfaoig.gov/Content/Files/AUD-2011-004.pdf).

3 Id4 Id.5 Id.


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M r . Edward DeMarcoPage 3To date, the top ten servicers account for the bulk of the feesdue; the total amount for allservicers, after approving appeals and corrections, is approximately $150 mil l ion dollarsfor 2010.6

M r . Pollard also described the methodology for calculating these penalties. Heexplained:

Fees are assessed based on each Enterprise's specific allowable foreclosure timelines forindividual states as published in their Seller/Servicer Guides. Each Enterprise assessesthe servicers a per day feeapproximately $30 a dayfor each day that the servicerexceeds the established timeline.7

The size and timing of these penalties raise serious questions about whether FHFA maybe more interested in expediting foreclosures to clear its books than protecting the rights ofhomeowners.

Request for InformationOn October 3, 2011,1 wrote to you to inquire about the extent of penalties imposed

against mortgage servicers that failed to meet federally imposed timelines to conductforeclosures. Specifically, I requested that you "provide a list of all servicers that have beenassessed compensatory fees, identify the total amount of fees assessed against each servicer,identify the reasons these fees were assessed, and identify whether the fees have been paid inf u l l . " 8

Although the letter f r o m M r . Pollard disclosed that the total amount of these penalties for2010 was $150 mil l ion , it did not provide the specific information I requested, including theamount of fees charged to each mortgage servicing company. For these reasons, I request thatyou provide the fo l lowing information:

(1) a list of all servicers that have been assessed compensatory fees;(2) the total amount of fees assessed against each servicer;(3) the reasons these fees were assessed against each servicer;

6 Letter f r o m M r . A l fr e d M . Pollard, General Counsel, Federal Housing Finance Agency,to Ranking Member Eli jah E. Cummings, House Committee on Oversight and GovernmentReform (Nov. 1,2011).

'id.Letter f r o m Ranking Member Eli jah E. Cummings, House Committee on Oversight and

Government Reform, to Acting Director Edward DeMarco, Federal Housing Finance Agency(Oct. 3,2011).


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M r . Edward DeMarcoPage 4

(4 ) whether each servicer assessed compensatory fees has paid the assessed fees infu l l ; and

(5) if a servicer has not yet paid the assessed fees in fu l l , the expected date by whichthe fees w il l bepaid in fu l l .

I request that you provide this information by November 30, 2011. I also request that youprovide the information requested above regarding compensatory fees assessed against mortgageservicers in 2011 when that information becomes available. Thank you for your consideration ofthis request.

Sincerely,

cc: The Honorable Darrell E. Issa, ChairmanCommittee on Oversight and Government Reform

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Elijah Cummings to Edward DeMarco