The ""Federal Housing Finance Agency"":http://www.fhfa.gov (FHFA) has directed ""Fannie Mae"":http://www.fanniemae.com and ""Freddie Mac"":http://www.freddiemac.com to transition away from their current foreclosure attorney network programs, and move to a system where mortgage servicers will select law firms based on minimum qualifications and uniform criteria.[IMAGE]
Currently, each GSE designates eligible law firms for individual states. Servicers then choose a firm from these lists to handle their foreclosure work.
FHFA says the new approach is in line with the Servicing Alignment Initiative that has been rolled out by Fannie and Freddie, which is intended to standardize procedures for handling past-due mortgages and processing foreclosures.
""FHFA believes these efforts will lead to greater transparency and benefit delinquent borrowers who become subject to the foreclosure process,"" the GSEs' conservator said in a statement. ""Further, the change will be supportive of the Consent Orders entered into by financial regulators and servicers.""[COLUMN_BREAK]
Fannie Mae's ""Retained Attorney Network"":https://www.efanniemae.com/sf/technology/servinvreport/amn/pdf/retainedattorneylist.pdf currently consists of 247 law firms that are pre-selected by the GSE to handle foreclosure-related matters for its loans in specified states.
Freddie Mac's ""Designated Counsel Program"":http://www.freddiemac.com/service/msp/pdf/desigcounsel.pdf includes 92 pre-approved firms for certain states.
FHFA has instructed Fannie and Freddie to work together to develop and implement consistent requirements, policies, and processes for managing default and foreclosure-related legal services.
As part of this effort, the GSEs are to ""pursue an eventual restructuring"" of their respective attorney networks, Freddie Mac explained in a bulletin to servicers Tuesday. That includes discontinuing the practice of maintaining a network of designated law firms for servicers, the company said.
FHFA says the dismantling of the networks will occur after a transition period in which the agency will seek input from servicers, regulators, lawyers, and other market participants. During this period, existing contracts remain in place and in effect.
In a report ""released earlier this month"":http://dsnews.comarticles/inspector-general-says-fhfa-was-aware-of-robo-signing-and-other-abuses-2011-10-04, FHFA's inspector general disclosed the results of an investigation prompted by ""widespread allegations of abuse by ... law firms hired to process foreclosures"" for the GSEs.
The inspector general said ""FHFA had not previously considered risks associated with foreclosure processing to be significant,"" and as a result, ""lacks assurance that law firms with histories of performance deficiencies do not jeopardize the safety and soundness"" of the nation's two largest mortgage financiers.