Caroline Herron’s Lawsuit Targets Fannie Mae’s Mismanagement of Mortgage Modification Program
Posted by Larry Doyle on August 11, 2010 7:17 AM |
Have executives at Fannie Mae worked to benefit their own financial interests versus promoting the well being of American taxpayers and homeowners looking to permanently modify their mortgages? Is Fannie Mae merely a perpetual train wreck or has something even more nefarious gone on inside the halls of our national stepchild?
In recently reviewing The Center for Public Integrity, I was not shocked — but certainly dismayed — to read Whistleblower: Fannie Mae Bungled HAMP Anti-Foreclosure Program,
Fannie Mae executives bungled their stewardship of the federal government’s massive foreclosure-prevention campaign, creating a bureaucratic muddle characterized by “mismanagement and gross waste of public funds,” according to a whistleblower lawsuit by a former Fannie Mae executive and consultant.
Caroline Herron, a former Fannie vice president who returned to the mortgage giant in 2009 as a high-level consultant, claims that the homeowner-relief effort was marred by delays, missteps and executives preoccupied with their institution’s short-term financial interests.
“It appeared that Fannie Mae officers were focused on maximizing incentive payments available to Fannie Mae under various federal programs – even if this meant wasting taxpayer money and delaying the implementation of high-priority Treasury programs,” she claims in the lawsuit.
Herron alleges that Fannie Mae officials terminated her $200-an-hour consulting work in January because she raised questions about how it was administering the federal government’s push to help homeowners avoid foreclosure, known as the Home Affordable Modification Program, or HAMP.
Fannie Mae signed a $113 million contract with the U.S. Treasury Department in February 2009 to administer HAMP. Fannie’s leaders have acknowledged they face challenges in running the program, but have said “we are committed to getting the job done, which is to help as many borrowers as possible if they are struggling to make housing payments.”
Fannie Mae declined to respond to specific questions from the Center for Public Integrity about Herron’s allegations or about its administration of HAMP. In a written response, a Fannie Mae spokeswoman said Herron’s attorney had “notified Fannie Mae in early March of her potential allegations. Upon learning of these allegations, Fannie Mae retained a former Inspector General of the Department of Justice to conduct an independent investigation. Ms. Herron was invited to participate in that investigation but she declined to do so. The investigation found no merit to her allegations.”
No surprise there.
The spokeswoman would not provide details of the investigation or a copy of the investigator’s report.
Thanks for the transparency!!
“Fannie Mae will not comment further to the press on the details of this pending litigation,” she said.
Fannie Mae has had some rocky times in recent years, from an accounting scandal to a near-death experience as the nation’s financial crisis reached a boiling point. Regulators concluded that Fannie’s strong financial results from 1998 to 2004 “were illusions deliberately and systematically created” by senior managers through bookkeeping tricks that helped boost their bonuses and other compensation.
That’s your tenure, Franklin Raines!! BOOKKEEPING TRICKS??!! Others would have paid a much larger price than mere fines while still walking away with tens of millions of dollars.
Are you ready to vomit yet? Do you wonder what happens when our government writes blank checks to their stepchildren? It’s called waste, if not worse.
Herron charges that Fannie Mae continued in headlong pursuit of “trial mods” even though it knew many had little chance of becoming permanent. As late as September 2009, barely 1 percent of trial modifications had converted to permanent modifications by the end of their three-month trial, a Congressional oversight panel found. Nevertheless, Fannie preferred doing trials, Herron alleges, because it was eligible to receive incentive payments from the Treasury Department for trial modifications it booked before the end of 2009.
I honestly do not doubt for a second that Fannie Mae was doing what Treasury wanted in terms of generating the largest modification numbers possible. Regrettably, or probably much worse, the modifications were trial and not permanent. The trial modification numbers bought some photo ops and press points but little else.
Will Caroline Herron’s lawsuit see the light of day? I wish it would, but I believe it will not because the administration has little interest in seeing the waste exposed.
Remember, there is a big difference between wealth creation and wealth redistribution. The latter provides no real incentive and thus we get no real progress.
America deserves so much better.
Related Sense on Cents Commentary
Sense on Cents/Fannie Mae