October 22, 2014

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Massachusetts Sues Fannie and Freddie for Blocking Home Buybacks

Earlier this month, Massachusetts Attorney General Martha Coakley initiated an action against Fannie Mae, Freddie Mac and the Federal Housing Finance Agency for allegedly illegally impeding non-profit foreclosure buyback programs. These buyback programs purchase properties in foreclosure and then resell the properties to the prior owners at an affordable price, helping low-income residents keep their homes.

Coakley alleges that the defendants have “employed policies that restrict the sale of properties owned or guaranteed by Fannie Mae or Freddie Mac, in direct violation of M.G.L. c. 244, §35(C)(h).” The governing “Act Preventing Unlawful and Unnecessary Foreclosures” prohibits creditors from refusing legitimate purchase offers from buyback programs. According to the Complaint, the arms’ length transaction requirements of the GSE Guides and an FHFA directive “effectively preclude the GSEs from dealing with non-profit organizations . . . that offer qualified homeowners an opportunity to ‘buyback’ or lease their homes.”

 

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Coakley approached the defendants on multiple occasions before filing suit, requesting that the entities voluntarily repeal the disputed policies. In a press release, Coakley stated, “[f]or too long, Fannie and Freddie have been roadblocks to progress in addressing this foreclosure crisis, and I urge them to immediately reverse their policy on this common-sense program.”

From what we have seen since the advent of the mortgage crisis, if Coakley is correct in this instance, it would be but one more example of what we view to be the GSEs’ inability or unwillingness after almost 7 years to help facilitate a meaningful restoration of the mortgage and housing markets.

© 2014 Bilzin Sumberg Baena Price & Axelrod LLP

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About this Author

Robert M. Siegel, Corporate, Tax, Attorney, Bilzin Sumberg Law Firm
Partner

Robert M. Siegel is a Partner in the Corporate & Tax and Restructuring & Bankruptcy Groups. He concentrates his practice in commercial finance, securitizations, debt restructuring and loan workouts. He is experienced in all aspects of the Uniform Commercial Code, and in particular, secured transactions under Article 9. Formerly with a Wall Street based law firm, Bob has been involved in complex financial transactions nationwide and abroad. Bob was an asset-based lender and a commercial real estate lender for several years prior to entering law school, and he brings a strong...

305-350-2421
Shalia Sakona, LItigation Attorney, Bilzin Sumberg Law Firm
Associate

Shalia Sakona is an Associate in Bilzin Sumberg 's Litigation Group. 

305-350-7216