Issa looks to withhold federal funds from slower foreclosure states
Rep. Darrell Issa, R-Calif., will begin working with the Federal Housing Finance Agency to determine which states have the slowest foreclosure processes and possibly begin withholding funds from these locales unless changes are made. Toward the end of a House committee hearing Wednesday over bonuses paid to Fannie Mae and Freddie Mac executives, questioning eventually shifted to why the government-sponsored enterprises were losing so much money when their top employees were being paid so much. FHFA Acting Director Edward DeMarco, who approved the payouts, explained the GSEs continue to fight losses from mortgages written between 2005 and 2007. One of his frustrations is with the extended amount of time many homes linger in the foreclosure backlog. Fannie and Freddie fine mortgage servicers that do not complete a foreclosure within mandated timelines. Bank of America (BAC), the largest GSE servicer, paid $1.3 billion for these delays so far in 2011. "We are foreclosing on properties that have had no payments for two, three years or more. It's damaging the taxpayer because we have to maintain these properties for so long and it's damaging to our communities," DeMarco said. Issa decided he would help. As chairman of the House Committee on Oversight and Government Accountability, he has the power to shape issues and policies regarding the interaction between state and federal governments. He asked DeMarco to provide him a list of states where the extended foreclosure timelines were directly affecting Fannie and Freddie losses. "We're open to making the changes necessary to help," Issa said. "I would hope that you would really look and give to us where the problems are." "This would be something that we would do," DeMarco said. According to RealtyTrac, New York foreclosures completed in the third quarter spent the longest time in the process at an average 986 days, followed by 974 days in New Jersey and 749 days in Florida. By contrast, the shortest timelines occurred in Texas at 86 days, followed by 94 in Kentucky and 102 in Virginia, RealtyTrac data show. In the third quarter of 2007, Texas foreclosures spent 54 days in the process. Four of the states with the longest timelines, according to RealtyTrac, received more than $2.3 billion of the $7.6 billion the Treasury Department sent through its Hardest Hit Fund to develop foreclosure prevention programs. Florida received $1 billion, followed by $570 million in Ohio, New Jersey with $300.5 million, and Illinois with $445 million. California, Issa's constituency, actually received the most, nearly $2 billion, but DeMarco said the state is actually one of the quickest foreclosure processors in the U.S. While these states have been overloaded with filings during a time when cramped budgets keep local courthouses from hiring new staff, the fault is not entirely their own. Servicers and foreclosure attorneys last year were found to be filing fraudulent documents en masse in order to speed up the process. Instead, foreclosures came to a halt in many states, especially Florida. Regardless, DeMarco repeatedly asked Congress to stop skirting the issue and get to work developing a transition for the secondary market. He was then asked repeatedly when Fannie and Freddie would repay the $151.7 billion they still owe in dividends to the Treasury. "I don't believe either company will be able to pay back the funds," DeMarco said, a point he has labored before. "Unless we keep this conservatorship going for my children and beyond, then no." Write to Jon Prior. Follow him on Twitter @JonAPrior.