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August 6, 2010
11:24 AM

Whistleblower: Fannie Mae Bungled Anti-Foreclosure Program

WASHINGTON - August 6 - 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 former Fannie Mae executive and consultant.

Whistleblower Caroline Herron claims that the Home Affordable Modification Program (HAMP) was marred by delays, missteps, and executives preoccupied with their institution's short-term financial interests. Her allegations provide a rare account from a former insider willing to tell what was going on behind closed doors with the government's handling of the $50 billion HAMP program, according to interviews and documents reviewed by the Center for Public Integrity.

Herron charges in a lawsuit that Fannie, which had a $113 million contract to administer HAMP, pushed as many borrowers as possible into short-term trial modifications because it was eligible to receive incentive payments from the Treasury Department for trial modifications it booked before the end of 2009. Despite its original stated goal of saving three million to four million homeowners from foreclosure, HAMP permanently modified about 230,000 mortgages in the program's first year - the equivalent of 8 percent of new foreclosures filed in 2009 alone.

Herron and others also criticize how Fannie and Treasury handled a "borrower portal" technology project aimed at helping to break the logjam of homeowners struggling to document and complete their modification requests. The lawsuit alleges that Fannie was reluctant to move quickly to make it easier for homeowners to provide extensive documentation to their loan servicers because it wanted to continue processing less-documented trial modifications.

A former Fannie vice president who returned to the mortgage giant in 2009 as a high-level consultant, Herron alleges that Fannie Mae officials terminated her $200-an-hour consulting work in January because she raised questions about its administration of the program.

Read and link to the full story "Whistleblower: Fannie Mae Bungled Anti-Foreclosure Program"

Here is the embeddable code for the Center's interactive timeline illustrating the story:∫=/project_assets/2010/08/FannieMae/Data/0810-fannieTimelineInterface.xml

The Center for Public Integrity is a nonprofit organization dedicated to producing original, responsible investigative journalism on issues of public concern. The Center is non-partisan and non-advocacy. We are committed to transparent and comprehensive reporting both in the United States and around the world.

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