Fannie Mae Cracking Down on Mortgage Documents

10/01/2010 Fannie Mae Issues the following letter to it's mortgage servicers:
Lender Letter LL-2010-11, Fannie Mae Requires Servicer Review of Procedures Relating to the Execution of Legal Documents

Details can be found here Fannie Mae Letter LL-2010-11 - basically Fannie Mae is instructing it's servicing companies to immediately review all documents & verify their proper status.

In LL-2010-11, Fannie Mae directs all of its servicers to immediately undertake a review of their policies and procedures relating to the execution of affidavits, verifications, and other legal documents in connection with the default process. If the servicer should have any concerns with its policies and procedures or their implementation, the servicer must advise its legal counsel to contact Fannie Mae in writing immediately via e-mail to nonroutine_litigation@fanniemae.com.

LL-2010-11 also emphasizes the application of existing Mortgage Selling and Servicing Contract and Servicing Guide provisions with regard to the following:

• Servicer's basic duties and responsibilities

• Compliance with applicable laws and mortgage documents

• Servicer's audit and control systems

• Consequences of non-performance of servicer's duties and responsibilities and non-compliance with applicable laws and mortgage documents

This is obviously in response to the "robo-sign" controversy where lenders/servicers have improperly documented the chain of ownership of some legal documents & mortgage documents. It's a hugely expanding problem that's really spreading throughtout the mortgage world. Many foreclosures could be put into questionable status with title insurance companies paying particular attention to this issue. The whole foreclosure market has been turned on it's tail this week with the revelation that many foreclosure activities have been executed improperly and/or in the opinion of several attorneys general have been potentially criminal.
 
This news has far reaching impact on many potential homebuyers plans to purchase a foreclosed property or who might have recently purchased a foreclosed property. The potential for litigation is still being looked into by former owners as well as new owners, leading some to question if now would actually be a good time to attempt a foreclosure purchase.
 
Several major lenders have put a 60 day hold on all foreclosure activity in states which require judicial notice of foreclosure activity. This is seen by some as a good thing for "blighted" neighborhoods in that regular sale properties will be seen as much more attractive to potential homebuyers over the often discounted foreclosure properties.
 
It'll really be interesting to see this develop....











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