Fannie and Freddie Require Attorney Oversight Of Nonjudicial Foreclosures

Freddie Mac

Both Fannie Mae and Freddie Mac are mandating that servicers refer nonjudical foreclosures to attorneys in California.  Fannie and Freddie are phasing out their existing Designated Counsel and Retained Attorney Network Program and adopting uniform standards for servicers and law firms providing default and foreclosure-related legal services.

FHFA recently issued a new directive requiring that new referrals beginning on June 1, 2013 must go through a law firm.  While trustees are not prohibited from conducting the foreclosures, it appears that the referrals must go through a law firm. 

In February, a UTA delegation met with FHFA officials in McLean, Virginia to discuss new guidelines for default and foreclosure-related legal services.   The UTA delegation - consisting of UTA President, T. Robert Finlay, Esq., Wright Finlay & Zak; UTA Past-President, Rande Johnsen, Trustee Corps; Elizabeth Knight, PLM Lender Services; and Michelle Mierzwa, Esq., Cal-Western Reconveyance Corp., were told that FHFA would be reviewing UTA’s perspective on attorney oversight. However, after the issuance of the San Francisco Assessor’s Report, FHFA is requiring attorney oversight.

In June, UTA joined an industry coalition in financing an economic report produced by Beacon Economics.  The Beacon Report, entitled “Foreclosure Reform in California:  An Economic Analysis”, focused on the unintended consequences of making the foreclosure process more difficult for lenders and provided an economic and fiscal impact of the proposed Homeowners Bill of Rights.  The report concluded that the California Homeowner Bill of rights would not help California’s housing market recovery and could actually increase the number of foreclosures in the state.  UTA issued a press release on that report.