Massachusetts Attorney General Martha Coakley is suing Freddie Mae, and the Federal Housing Finance Agency because she says that they are not working with the nonprofits willing to repurchase bank-owned homes and then sell them back to their prior owners. Coakley is claiming violations of the state’s foreclosure prevention law.
Under certain Massachusetts programs, nonprofits can now buy homes that belong to the bank at market value and then sell them to previous owners that qualify for financing at a new price that is lower than market value. The Massachusetts AG believes that the FHFA, Freddie, and Fannie are getting “in the way” of these sales.
Coakley has pointed to the regulator’s policies, including one that won’t allow the two home mortgage companies to accept a price under the outstanding loan amount when houses are resold. Coakley says this is preventing families from getting their houses back. Meantime, FHFA has said that its policies protect taxpayers.
Coakley has been aggressively policing banks over their treatment of homeowners and the securitization of mortgages. Already she has won settlements from Morgan Stanley (MS), Goldman Sachs (GS), RBS (RBS), and other subprime lenders.
This latest lawsuit follows one by a homeowner who purchased an apartment for around $300,000 in 2005. The unit is now valued at one-third of that amount. The nonprofit Boston Community Capital, which operates a buyback program, offered to purchase the apartment from the lender for $115,000. The program was to then sell the home back to the owner.
Freddie, however, refused to let the sale go through, insisting that the full $300,000 be paid. A federal court has since put out a preliminary injunction against the sale or foreclosure of the home.
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Massachusetts Sues Fannie and Freddie Over Foreclosure Law, NY Times, June 2, 2014
Coakley to sue Fannie Mae and Freddie Mac for blocking sales of bank-owned homes to nonprofits, Boston Business Journal, June 2, 2014
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