Fannie Mae and Freddie Mac were prime players in the mortgage meltdown that led to the worst recession since the Great Depression. Those government-backed corporations own more than 60 percent of the mortgages in California, which is second only to Nevada in devastation from the foreclosure crisis. In the past five years more than 768,000 homes have been foreclosed upon in this state, including thousands in San Francisco from Bayview to Pacific Heights.
Foreclosure has turned the American dream into a nightmare for those forced to lose their homes. Some are also victimized by scam artists who charge hefty fees with false promises of loan modifications that will save their homes.
Foreclosure is also problematic for the surrounding neighborhood. Abandoned properties can become havens for criminals engaging in copper theft, drug trafficking and prostitution. The yards can become overgrown with weeds, resulting in fire hazards, and turn into dumping grounds for trash. The value of nearby homes can fall by thousands of dollars.
Appropriately, California Attorney General Kamala Harris has made this issue a priority. In May she formed the Mortgage Fraud Strike Force to investigate predatory lending scams and corporate investment securities misconduct.
A week after its formation, the California Department of Justice sued several law firms and their marketing partners for fraudulently promising to win prompt mortgage relief for millions of vulnerable homeowners. In November, a Fremont woman was sentenced to serve five years and ordered to pay $31,000 restitution to dozens of Bay Area and Central Valley homeowners who paid for foreclosure services that were never delivered.
In December, three officers of a Stockton real estate company were arrested for allegedly taking thousands of dollars in exchange for false promises to lower the mortgage payments of struggling Central Valley homeowners. Two Southern California men were arrested for collecting more than $6 million from homeowners nationwide for mortgage services that were never performed.
In mid-November, Harris took on the mortgage titans, serving subpoenas on Fannie and Freddie seeking information on problems with the more than 20,000 foreclosed homes in California that they own. The 51 questions ask about criminal activity, hazardous materials, mosquito-filled pools, fire hazards, whether members of the armed forces have been unlawfully evicted and whether California securities and tax laws are being followed.
Fannie and Freddie brushed off the subpoenas, saying that the information sought was voluminous and vague and that California does not have oversight authority over them. On Dec. 20, Harris filed a lawsuit in Superior Court to force Fannie and Freddie to comply.
It remains to be seen who will prevail in court. But it’s good to see that Harris — who, as San Francisco district attorney, launched the first stand-alone mortgage fraud unit in California in 2009 — is continuing to fight the good fight on behalf of all Californians.