Foreclosure Mills Pocketed $50M From Fannie, Freddie

Fight disinformation: Sign up for the free Mother Jones Daily newsletter and follow the news that matters.


In late November, as the Foreclosure-gate scandal spread throughout the country, Rep. Randy Neugebauer (R-Tex.) demanded to know how much money Fannie Mae and Freddie Mac, the wounded quasi-government housing corporations, had paid to multiple sleazy law firms at the heart of the foreclosure crisis. One of the firms Neugebauer had in his crosshairs, the Law Offices of David J. Stern in southeastern Florida, had been the subject of a long Mother Jones investigation in August, which also detailed how Fannie and Freddie gave rise to this unscrupulous and greedy breed of law firms. This week Neugebauer got his response: according to data reviewed by HousingWire, the firms in question received nearly $50 million in legal fees from Fannie and Freddie.

Most of that money, $46 million, came from Freddie Mac, the smaller of the two corporations; Fannie paid the controversial firms $2 million. That’s quite a hefty sum for Florida’s largest “foreclosure mills,” as they’re known. But the coziness between Fannie and Freddie and the foreclosure mills doesn’t stop there. After all, foreclosure mills wouldn’t exist were it not for the creation of the two government corporations. As I wrote in August,

Fannie and Freddie also reshaped the foreclosure industry. Their huge holdings meant they had to deal with thousands of foreclosures annually—even during time when relatively few loans were going bad. In the 1990s, the market expanded into subprime territory to feed the securitization beast, and borrowers began defaulting at higher rates. Hiring lawyers on a case-by-case basis was burdensome, so Fannie and Freddie put together a stable of law firms willing to litigate large bundles of foreclosures quickly and cheaply. They urged these handpicked firms to bring all foreclosure-related services—inspections, eviction notices, sales of repossessed properties, and so forth—in-house. Thus emerged the foreclosure supermarket.

David Stern joined that stable of firms in the 1990s, and was even named Fannie’s “Attorney of the Year” in 1998 and 1999. So important were Fannie and Freddie’s business to him that he considered them “his babies,” according to a former employee.

But as soon as Stern’s ship began to sink last year, and the Florida attorney general began investigating his operations, Fannie and Freddie dumped Stern and began using other smaller Florida firms. A number of Wall Street banks cut him out of their foreclosure businesses as well, including Citigroup and Bank of America. Right now, the stock of the publicly traded he helped to start, DJSP Enterprises, a foreclosure processing outfit, is languishing around $.50 and faces delisting from NASDAQ, if it doesn’t rebound.

AN IMPORTANT UPDATE

We’re falling behind our online fundraising goals and we can’t sustain coming up short on donations month after month. Perhaps you’ve heard? It is impossibly hard in the news business right now, with layoffs intensifying and fancy new startups and funding going kaput.

The crisis facing journalism and democracy isn’t going away anytime soon. And neither is Mother Jones, our readers, or our unique way of doing in-depth reporting that exists to bring about change.

Which is exactly why, despite the challenges we face, we just took a big gulp and joined forces with the Center for Investigative Reporting, a team of ace journalists who create the amazing podcast and public radio show Reveal.

If you can part with even just a few bucks, please help us pick up the pace of donations. We simply can’t afford to keep falling behind on our fundraising targets month after month.

Editor-in-Chief Clara Jeffery said it well to our team recently, and that team 100 percent includes readers like you who make it all possible: “This is a year to prove that we can pull off this merger, grow our audiences and impact, attract more funding and keep growing. More broadly, it’s a year when the very future of both journalism and democracy is on the line. We have to go for every important story, every reader/listener/viewer, and leave it all on the field. I’m very proud of all the hard work that’s gotten us to this moment, and confident that we can meet it.”

Let’s do this. If you can right now, please support Mother Jones and investigative journalism with an urgently needed donation today.

payment methods

AN IMPORTANT UPDATE

We’re falling behind our online fundraising goals and we can’t sustain coming up short on donations month after month. Perhaps you’ve heard? It is impossibly hard in the news business right now, with layoffs intensifying and fancy new startups and funding going kaput.

The crisis facing journalism and democracy isn’t going away anytime soon. And neither is Mother Jones, our readers, or our unique way of doing in-depth reporting that exists to bring about change.

Which is exactly why, despite the challenges we face, we just took a big gulp and joined forces with the Center for Investigative Reporting, a team of ace journalists who create the amazing podcast and public radio show Reveal.

If you can part with even just a few bucks, please help us pick up the pace of donations. We simply can’t afford to keep falling behind on our fundraising targets month after month.

Editor-in-Chief Clara Jeffery said it well to our team recently, and that team 100 percent includes readers like you who make it all possible: “This is a year to prove that we can pull off this merger, grow our audiences and impact, attract more funding and keep growing. More broadly, it’s a year when the very future of both journalism and democracy is on the line. We have to go for every important story, every reader/listener/viewer, and leave it all on the field. I’m very proud of all the hard work that’s gotten us to this moment, and confident that we can meet it.”

Let’s do this. If you can right now, please support Mother Jones and investigative journalism with an urgently needed donation today.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate