House lawmaker calls for probe of Fannie Mae allegations

Posted on August 9, 2010


The top Republican on the House Financial Services Committee called on Friday for an investigation into charges that mortgage finance giant Fannie Mae pushed borrowers into a mortgage aid program so it could receive incentive payments from the U.S. government.

Spencer Bachus, the top Republican on the House Financial Services Committee, asked panel chairman Barney Frank to hold a hearing to investigate allegations made in a lawsuit filed in June by former Fannie Mae consultant Caroline Herron.

The Center for Public Integrity, a government watchdog group, disclosed the lawsuit on Friday. In it, Herron said she was fired in January after she raised questions about delays and missteps in President Barack Obama’s $50 billion Home Affordable Modification Program (HAMP).

The HAMP program, which is administered by Fannie Mae, helps subsidize new terms for borrowers struggling to keep up with their mortgage payments.

“If true, it would help explain why HAMP has been such a failure,” said Bachus.

“It would mean that thanks to Fannie Mae’s executives’ misfeasance, particularly a preoccupation with short-term financial gain, HAMP was only able to permanently modify about 230,000 mortgages, instead of the 3 million modifications that the Obama Administration promised,” he said.

Janis Smith, a spokeswoman with Fannie Mae, said it was notified in early March of Herron’s allegations and later had an independent investigation conducted.

The review, led by Michael Bromwich, a former inspector general at the Justice Department “found no merit to her allegations,” Smith said.

Herron, a former vice president at Fannie Mae, returned in 2009 as a consultant where she earned $200-an-hour. She said in the lawsuit she was fired after saying the HAMP program was characterized by “mismanagement and gross waste of public funds.”