STATE SENATE | Fannie Mae may have illegally received borrower's contributions to short sales in violation of a California state law authored by State Sen. Ellen Corbett. In a letter sent Tuesday by Corbett and Santa Rose State Sen. Noreen Evans, they ask State Attorney General Kamala Harris to investigate the collection of over $3 million in fees from over 1,200 short sales in California on behalf of the government-backed Fannie Mae.
The state law passed in 2011 was aimed at protecting California homeowners, many of which possess a disproportionately large number of underwater mortgages stemming from the Great Recession. The law specifically forbids lenders from collecting fees to begin the process of a short sale—often a last resort for borrowers hoping to retain proceeds for at least some portion of the remaining debt balance on their home loans.
Corbett was critical of Fannie Mae for allowing its smaller service providers apply the state law and urged for repayment of the fees. “Throughout this process, Fannie Mae has taken a hands-off approach, letting their servicers decide not only how to interpret the law, but also how to correct the situation without proper oversight. This is simply unacceptable,” said Corbett.
A remediation plan in response to the violation of state law was drafted by Fannie Mae last October. But, in a separate letter to its CEO Tim Mayopoulos, Corbett and Evans admonished him for failing to adopt consistent guidelines. “In effect, Fannie Mae took no initiative to ensure that California laws were followed and their borrowers protected.”