Posted Oct 19, 2011 11:52 am CDT
Fannie Mae and Freddie Mac will allow mortgage servicers to choose their own foreclosure law firms after some firms in the mortgage giants’ discounted attorney networks were caught up in the robo-signing scandal.
The Federal Housing Finance Authority, which oversees Fannie and Freddie, announced it has ordered a revamp of their foreclosure attorney system, report the National Law Journal, Bloomberg News and the Wall Street Journal (sub. req.). Under the new system, lenders will be allowed to choose law firms that meet “minimum, uniform criteria,” according to a press release (PDF).
The changes will take place after a transition period allowing for input by lawyers, regulators, mortgage servicers and others.
One of the law firms in the attorney network was the David J. Stern firm in Plantation, Fla., which collapsed earlier this year after it was fired by Fannie Mae amid robo-signing allegations. An inspector general’s report released earlier this month found that Fannie Mae knew of abuses by foreclosure mill law firms as early as 2003, but was slow to address the problem.