Fannie’s Lawyers Falsely Certify Compliance With PTAF in eviction context

Posted on February 28, 2010 by Robert Doggett, Texas RioGrande Legal Aid

This article is another detailing Fannie Mae’s refusal to adequately implement the Protecting Tenants at Foreclosure Act (PTAF or sometimes PTFA).  So Fannie Mae was quick to mention in response to an earlier article that it technically did not do anything wrong because the letter was not received by a bonafide tenant (which was true).  See article here, and article where Fannie blames its lawyers for the bad letter here.  Well below is an example Fannie Mae, their lawyers, and their realtors might have trouble explaining (description begins under video).  Video below generally describes the law and the problem:

A tenant had a one year lease with landlord to rent a condo in Austin, Texas for $1,190 a month.  The lease is here.  The landlord and the tenant were not related in any way (so the tenant qualifies under the Protecting Tenants at Foreclosure Act or PTAF for short).  Article describing more about the law here.

It seems the landlord was receiving the rent, but not paying his mortgage payments to the lender so Fannie Mae foreclosed December 2, 2009.   On December 11, 2009, a realtor visited with the tenant and gave him a Fannie Mae document called “Know Your Options”, copy here.  This document does not mention PTAF rights at all, and the realtor either was unaware of PTAF or did not care to know about it because she was not interested when the occupant explained he was a tenant.  (Fannie has other versions of “Know Your Options” that mention PTAF but it appears their agents use the version they prefer.)

On December 29, 2009, the realtor returned and provided another document to the tenant here, that also did not mention the tenant’s rights under PTAF.  The tenant reports that the realtor basically wanted the tenant out so she could sell the property and implied an eviction would be coming soon if he did not leave.

The realtor was correct.  The tenant received a letter here dated February 5, 2010 from Barrett Daffin Frappier Turner & Engel which was very familiar — it was the same letter that was sent out as referenced in the earlier posting, article here.  The letter says Fannie Mae owns the property and the “Occupant(s) and/or Tenant(s)” must vacate within 3 days otherwise suit will be filed immediately or at their option after 10 days which will entitle them to attorney fees.  The letter expressly states that if the occupant is a tenant, “Fannie Mae has chosen not continue your lease and therefore you are no longer entitled to possession”.  (The letter gives the tenant 30 days to move if the tenant had already paid rent prior to getting the notice.)  Copy of the letter sent to the bonafide tenant here.

The tenant did not move by the deadline in the letter, and Fannie’s law firm did what it promised. On February 9, 2010, an attorney for Barrett Daffin Frappier Turner & Engel executed an affidavit that was a part of the eviction papers filed in justice court that read:

My name is …. I am agent and attorney for Plaintiff and as such, I am authorized to make this Affidavit on their behalf.  I have read the foregoing Original Petition for Forcible Detainer and the statements made therein are within my personal knowledge and are true and correct.

Original Petition for Forcible Detainer filed February 11, 2010, here.

The petition also states one thing very clearly:

In accordance with Section 24.005 of the Texas Property Code and also in accordance with the Protecting Tenants at Foreclosure Act of 2009, written demand was made upon Defendant(s) to vacate the premises located on the Property.

Paragraph VII, Original Petition for Forcible Detainer filed February 11, 2010, here.

How exactly was the letter proper notice under PTAF?  Fannie must honor the tenant’s lease or give the tenant 90 days notice (it did neither).  Of course, Fannie’s attorney will undoubtedly claim she did not know a tenant was renting the property.  However, the affidavit that says the attorney has personal knowledge. Either the attorney did not have personal knowledge and the affidavit is false, or the attorney did know there was a tenant in the property and she ignored the law, making the affidavit false.

Fannie’s letter is inappropriate on its face — the letter contemplates that a tenant occupies the property and yet states the new owner is not honoring the lease agreement.  If Fannie Mae claims it was told that the former homeowner was occupying the property (thus not entitled to PTAF protection), it should have addressed the letter to the former homeowner, and then included language that says “we understand that the occupant of this property is the former owner, if you are actually a bonafide tenant under PTAF, we will honor your lease or give you 90 days notice, please contact us, etc.”  If the firm knows a tenant is living in the property, but not one entitled to protection under the Act, they can specify that too.  Instead they use a blanket letter regardless of the situation that is deceptive to bonafide tenants.  There are many ways to do this right, and this is not one of them.  How will bonafide tenants know to complain or object unless they know the law already?  They won’t and Fannie and its lawyers know it.  This system is designed to trick people out of their rights plain and simple.

It appears this happened to another tenant of Fannie Mae who knew better and was not afraid to speak up:

I don’t particularly desire to become the landmark legal precedent cited by future tenants fighting for their rights under the PTAF, but I am willing to do so on principle as I’ve been taught to stand up for what’s right in my more than 20 years service to the nation in the Marine Corps and Air Force.

Ken Hall, February 20, 2010, post here.

Another here, and here,  Fannie Mae claims that it has told its vendors to follow the law and use the correct forms.  Fannie says it tries to correct a problem once it finds it.  For example, when notified of the tenant described at the top of this post, Fannie had its lawyers put a hold on the eviction case (it did not request dismissal even though the case is utterly defective, if not illegal and unethical).  Fannie’s attempts are half-hearted at best.  Fannie Mae simply refuses to do things the right way to avoid these “mistakes”.  Meanwhile Fannie appropriately refuses to sign a certification that it is complying with PTAF (they just let their lawyers do it in eviction cases), which prevents the Neighborhood Stabilization Program from progressing at least in Texas, see article here.

It might appear that affirmative class action relief and other appropriate action should be taken against Fannie Mae, its attorneys, and agents to get their attention.  The law was effective in May 2009; that is enough time for proper implementation.  Fannie sure managed to accept billions in taxpayer money and implement that quickly.  I think the taxpayers deserve equal attention when it comes to their rights.

Filed under: Advice for Borrowers, National Foreclosure News, Texas | 2 Comments »

Fannie [and other lenders] won’t certify compliance with PTAF – slows program to stabilize neighborhoods

Posted on February 26, 2010 by Robert Doggett, Texas RioGrande Legal Aid

Update: 3/4/2009: The National Foreclosure Prevention and Neighborhood Stabilization Task Force (operated by the National Housing Conference) confirmed on a recent conference call that “all over the country [NSP] deals are not happening because when they get to the closing, lenders won’t sign [the PTAF] certification.”  Another problem is that there seems to be some on the task force that think the NSP recipients (e.g., local governments) should just accept the risk for the lenders’ probable failure to follow the law — instead of demanding lenders comply with the simple requirement that lenders honor the leases or give bonafide tenants 90 days notice if the leases have expired.  In other words, some on the task force forget that it is the lenders actions that destabilized the communities and the financial health of the country in the first place, and some seem to want to allow these same lenders, Fannie Mae included, to ignore yet another law – this one designed to protect tenants.  Sickening.

Fannie claims to have addressed the NSP certification issue for some recipients (not Texas as mentioned in the original post below) by hedging the language of the certification:

Fannie Mae has established a due diligence process that attempts to identify any bona fide tenant (“Bona Fide Tenant”), as that term is defined under the Protecting Tenants at Foreclosure Act of 2009 (“the Act”), that occupies a property acquired by Fannie Mae through foreclosure on or after the date of the Act. Upon information and belief, any Bona Fide Tenant protected by the Act, occupying the Property after the date of the Act, received all notices required pursuant to the Act. Upon information and belief, Seller states that the Property was vacant at the time Buyer and Seller entered into negotiations for purchase of the property Upon information and belief, Fannie Mae became initial successor in interest to the Property after a foreclosure sale on __________________ (foreclosure sale date).  Upon information and belief, Seller states that the Property was vacant as of ________ (Initial OSR Date).

The language above is hardly a certification, and even Texas recognizes it as stated below.  “Upon information and belief” means little.  Upon information and belief Fannie tries to follow the law.   Fannie will not let borrowers certify income on information and belief — and they shouldn’t.  Fannie and the other lenders need to follow the law, and document it in each case.  If they cannot do that for a particular house they bought at a foreclosure sale, shame on them, but they also don’t have to try to sell it into the NSP program.  There are foreclosures happening everyday, well enough to use all the NSP funds in a month.  If lenders documented compliance with PTAF starting now for a particular house, there would be plenty for the NSP recipients.  To water down the PTAF certification requirement for NSP funding is simply unconscionable.

——Original Posting——

The Neighborhood Stabilization Program (NSP) was established to stabilize communities that have suffered from foreclosures and abandonment.  See description here.  NSP authorizes recipients (states, nonprofits and others) to acquire foreclosed properties and then resell them to qualified buyers.  Recipients target certain areas that have concentrations of foreclosures in order to stabilize the rest of the neighborhood using NSP funding.

One requirement of NSP is the seller of the foreclosed property (often a lender) must certify it has complied with the Protecting Tenants at Foreclosure Act (PTAF).  HUD Guidance here.  Description of PTAF here – essentially the law requires owners of foreclosed properties to honor leases of bonafide tenants (or give at least 90 days notice to vacate if the lease is expired).  If the seller refuses to certify compliance with PTAF, the recipient can still acquire the property for the program but they must attempt to determine whether PTAF was complied with.  Only if the recipient believes PTAF was complied with AND ASSUMES THE LIABILITY IF IT IS WRONG, can the recipient can acquire the property using NSP funds.  HUD Guidance here.

Recipients such as the state of Texas have focused acquiring properties from Fannie Mae since it is the largest lender in the world and undoubtedly has one of the largest portfolios of foreclosed property.  It is also worth mentioning again that Fannie Mae is under the control of the federal government at present.

Not surprisingly, Fannie Mae refuses to certify it complies with the Protecting Tenants at Foreclosure Act (PTAF). See statement of Texas agency below.  Again, Fannie Mae refuses to sign a document saying it has complied with the law, a document required for participation in the federal Neighborhood Specialization Program (NSP).

I say not surprisingly because Fannie Mae’s system to evict the occupants of the properties it forecloses on is flawed and they know it.  While they blame their lawyers and realtors for mistakes and take no responsibility for them (story here), they refuse to design a system that would prevent violations of PTAF.  Thus, they know they violate PTAF in some cases and refuse to certify compliance because they have no idea whether they have complied or not. (I guess it would be worse if they certify something they know to be false.  Talk to Westchester County New York about false certifications, story here.)  So rather than design a better system that works and sign the certification, they hope states like Texas take the risk itself, or move on to another lender.

The failure of holders of REO to fully certify compliance with PTAF is the largest current obstacle to obligating NSP dollars. Fannie Mae and FHA foreclosed homes are the most important to our subrecipients as they are the most prolific. We developed a Texas NSP Purchase Addendum to be used on all applicable transactions to ensure that [PTAF] requirements were met. Fannie Mae refuses to certify, but has at least maintained a dialogue with us. Despite our repeated attempts to decipher exactly what in the Addendum is so objectionable, we still haven’t precisely identified the problem; we believe the principal issue to be PTAF. Fannie tells us that they are PTAF compliant because they are doing all they can. They claim they have established a due diligence process to identify any bona fide tenants. However, we think that their process falls short.

Michael Lyttle, Texas Department of Housing and Community Affairs, February 26, 2010.

And what is the effect of lenders like Fannie Mae refusing to certify compliance with PTAF?  Texas reports that the PTAF certification is hands down the number one problem with implementation of the program — a program designed to get eligible families into affordable homes, while stabilizing neighborhoods.  [And it is not just a Texas issue, see update above of 3/4/2010.]  So while Fannie Mae sits on its hands and lets its henchman push tenant families out of their homes illegally, it smartly refuses to certify compliance and shove the liability to others interested in stabilizing their communities.

I am sure explanations are coming my way soon.  In fairness to Fannie Mae I contacted them about this issue a week ago.  Fannie explained that they have documents they are willing to sign for recipients that have worked (I have not seen these documents as yet).  It appears Texas merely wants Fannie to follow the law as written, which should be something the federal government agrees with.

Filed under: National Foreclosure News, Texas | Leave a Comment »

Fannie Mae Blames its Lawyers for Post-Foreclosure Letters

Posted on February 8, 2010 by Robert Doggett, Texas RioGrande Legal Aid

Is the law firm's letter more than smoke?

Update of 2/28/10: See article here on Fannie Mae’s lawyers here.

————–

In response to my posting last week here, Fannie Mae made an effort to investigate the individual case I highlighted and to discuss my overall concerns.  The point of the posting was not to focus on an individual case, but the larger policy at stake.  I have been on many conference calls and listservs involving tenant advocates across the country, and there is undoubtedly a huge problem with lenders ignoring the law, or intentionally misleading tenants about their rights under the law.  Thus far, federal agencies have not stepped in (only the Attorney General of Connecticut has done so to my knowledge, article here).

Fannie explained that they do their own investigation of the occupants of a home after they purchase it at a foreclosure sale.  Fannie says they do not involve lawyers at all until they determine that the occupants do not appear to be covered by the Protecting Tenants at Foreclosure Act (PTFA), and that the occupants are unable or unwilling to continue to rent on a month to month basis under their own month-to-month rental program. (I am concerned that Fannie attempts to encourage tenants to enter month-to-month leases instead of honoring the current ones as can be seen from their description on their website alone here.)   Fannie claims it only has its lawyers get involved to begin eviction in these other rare circumstances.

I fail to see why it matters when Fannie lawyers get involved.  It appears realtors contact occupants first, which have greater interests to remove occupants of the property so the property can be listed and sold (earning the relator a commission).

Of course the problem is Fannie’s letter highlighted in the posting says nothing of an investigation — it was sent to “Occupant” and plainly states: “If you are a Tenant in the property, please be advised that Fannie Mae also known as Federal National Mortgage Association has chosen not to continue your lease and therefore, you are no longer entitled to possession.” See copy here.  Clearly, a statement like this sent by any lender to a bonafide tenant post-foreclosure would violate the language, meaning and intent of PTFA.  When I inquired, Fannie admitted it did not approve the letter and has since spoken with its lawyers to ask them not use it again because it appears to contradict its policies (but I doubt that the law firm of Barrett Daffin Frappier Turner & Engel LLP drafted this letter just for Fannie Mae).  Also in its defense, Fannie Mae correctly states that the occupant of the property that received the letter I highlighted was the former homeowner, so in this particular case there was no victim.  But the document appears to be a form letter and a question remains whether it has or will be sent to a bonafide tenant on behalf of Fannie or another lender.  (Update 2/26/10: It is not longer a question, the letter has been sent to bonafide tenants, see article here.)

Given that Fannie Mae has thousands of loans, thousands of foreclosures, and thousands of people working on them across the country, it might be far better if Fannie Mae would mandate what its lawyers do, as opposed to trust them.

Fannie Mae admits that it has learned of a variety of other problems in California, Utah and Connecticut and that much of the problem was implementation of its tenant policy, not the policy itself.  Alternatively, Fannie Mae might want to consider changing counsel to avoid even the appearance of impropriety.  Fannie is spending our money afterall, and firing Barrett Daffin would get the attention of other foreclosure attorneys and vendors I would imagine.  But there are undoubtedly many factors to be considered before taking such a step (it might not be Barrett Daffin’s fault for example).

Fannie Mae must not merely be able to blame its attorneys for its unwillingness or inability to control them, but I am hopeful Fannie Mae is in fact following the law and any evidence to the contrary disappears well before the law expires.

Filed under: Advice for Borrowers, National Foreclosure News | 4 Comments »

Fannie Mae Violating the Protecting Tenants at Foreclosure Act, and the Federal Reserve Is No Better

Posted on February 2, 2010 by Robert Doggett, Texas RioGrande Legal Aid

Update of 3/1/10: Federal Reserve apologizes for misinformation regarding its authority to regulate PTAF issues, but passes the buck on the complaint anyway. Story here.

Update of 2/8/10: See latest post wherein Fannie Mae blames its lawyers for its post-foreclosure letters.  See new post here.

Update of 2/3/10: “Tenants Together”, a California tenant organization, operates a hotline for tenants in foreclosure situations, and today issued a press release that it is receiving a growing number of calls from tenants living in Fannie Mae properties who are being “harassed and misinformed by Fannie Mae-contracted [agents] in violation of the [PTFA].”  See story here.

—————————-

There have been previous postings regarding lenders who choose to ignore the clear requirements of the Protecting Tenants at Foreclosure Act which is no longer brand new — it became law May 20, 2009.  See posts here, and here.  After a foreclosure occurs, the new owner is supposed to honor a bona fide lease a tenant may have had with the prior owner (unless the new owner plans to occupy the property as his primary residence).  If there is no lease, or the lease is expired, the new owner must still give tenants 90 days notice to vacate.  See more on the law here.  Many lenders have decided to confuse and scare tenants with deceptive and intimidating letters.  What is astounding is that Fannie Mae, which is operated by the federal government, has chosen to completely violate the law.

In a notice to vacate dated January 13, 2010, lawyers for Fannie Mae state its position clearly:

If you are a Tenant in the property, please be advised that Fannie Mae also known as Federal National Mortgage Association has chosen not to continue your lease and therefore, you are no longer entitled to possession.  … If you have paid your rent to your landlord prior to receiving notice of the foreclosure referred to above, you MUST VACATE THE PREMISES WITHIN THIRTY (30) DAYS from the date this notice is delivered.

Letter from Fannie Mae attorneys, dated January 13, 2010 (here).

This is not an isolated problem.  I complained about Fannie Mae in September 2009 about this very problem (here).  How can we expect for profit, for bail out, for big bonus banks to follow the law when Fannie Mae, a Government Sponsored Enterprise and one of the largest lenders in the world, flatly refuses to do so?

I am not confident that an administrative complaint with the appropriate federal agency will resolve anything.  In response to a previous complaint I made regarding a deceptive letter sent on behalf of The Bank of New York Mellon, (here) the Federal Reserve Bank of New York suggested that I contact the lender’s attorneys (Barrett Daffin Frappier Turner & Engel, LLP) and suggest changes (I presume) and not complain about the all powerful lender, and concluded by stating:

The procedures entities must follow when foreclosing on real estate are matters of individual bank policy that are governed by principles of contract and state law.  Therefore, the resolution of disputes about the acceptability of such procedures is not within the supervisory jurisdiction of the Reserve Bank.

Letter from Muriel R. Payne, Federal Reserve Bank of New York, January 19, 2010 (here).

First, I was not complaining about the foreclosure procedure.  I was complaining that a purchaser of property at a foreclosure sale, a lender that is regulated by the Fed, was misleading tenants regarding their rights provided by federal law.  Second, parties are responsible, not attorneys.  I in fact had a face to face meeting with the lawyers for this lender (the same lawyers that sent the Fannie Mae letter above) and they explained that their clients approve these letters and they would have to get permission to change them.  Third, it is disingenuous to suggest that the Fed does not have jurisdiction.

In fact the Fed issued a compliance letter on the subject giving guidance to their examiners:

Given the importance of the protections this law provides to tenants, examiners are instructed, as part of consumer compliance examinations, to evaluate an institution’s awareness of the law, its efforts to comply, and its responsiveness to addressing implementation deficiencies.

Federal Reserve CA 09-5, July 30, 2009, here.

The Fed has even issued specific examination procedures on what to look for and when to give corrective action:

2. Determine that the institution has incorporated its compliance responsibilities under the law into its operations, particularly with respect to its foreclosure notice procedures.      …

7. Summarize findings and supervisory concerns.  Identify actions needed to address any weaknesses and deficiencies in the institution’s compliance management systems. Discuss findings with institution management and obtain any necessary commitment for corrective action.

Fed, Protecting Tenants at Foreclosure, Examination Objectives and Procedures, at 3 here.

Some may complain about the for profit banks.  They should.  It is however disgusting that the federal authorities refuse to do anything to follow the law themselves, much less make anyone else do it.

Filed under: Advice for Borrowers, National Foreclosure News | 2 Comments »

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