Federal Home Finance Agency (FHFA) Acting Director Edward J. DeMarco told the House Judiciary Committee Thursday that regulators, lawmakers, investors, and the general public want answers to the questions raised by the recent breakdown in foreclosure processes "and we want them now." Testifying in a hearing on Foreclosed Justice: Causes and Effects of the Foreclosure Crisis, DeMarco said that shortly after robo-signing and title issues were first reported, FHFA issued a four point policy framework to Freddie Mac, Fannie Mae (GSE's) and their servicers. The four points were:
- Verify that the foreclosure process is working properly;
- Remediate any deficiencies indentified in foreclosure processing;
- Refer suspicions of fraudulent activity; and
- Avoid delay in processing foreclosures in the absence of identified problems.
The GSE's are gathering information on the full nature and extent of servicer problems. Thus far, DeMarco said, only a small number of servicers have reported problems but these servicers manage a large portion of GSE business. It is difficult to determine how many delinquent loans may be affected or how difficult it might be to address the deficiencies as they differ in size and scope and not all loans handled by a particular servicer may be affected. The current review is being conducted on a file-by-file basis so assessing the problem may take a substantial amount of time and resources.
FHFA is also participating in a multi-agency examination of the Mortgage Electronic Registration Systems (MERS) and is reviewing the GSE's oversight of their counterparties. FHFA, however, has no regulatory authority over servicers and the GSE's relationships are contractual rather than regulatory. DeMarco said that FHFA expects compliance with the law from all of its servicers and from the law firms they engage and the GSE's may pursue remedies for violations of those contracts.
The Acting Director said he does not support a blanket moratorium on foreclosures because the costs to neighborhoods, taxpayers, and investors would be enormous. The focus should instead be on fixing any problems that are found and moving forward with proper and legal foreclosures where other alternatives have been exhausted. "Delay is costing taxpayers money and creates undesirable incentives for homeowners to stop paying their contracted mortgage obligations," he said.
FHFA is also reviewing the GSE's practices in enforcing reps and warrants and it expects adherence to contract terms with regard to mortgages the GSE's purchase and in regard to mortgage servicing.
