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Foreclosure-Gate: Flawed Foreclosure Documents Thwart Home Sales

Amanda Ducksworth was supposed to move in to her new home this week, a three-bedroom steal here in central Florida with a horse farm across the road. Instead, she is camped out with her 7-year-old son at her boss’s house. Fuse | Getty Images Like many buyers across the country, Ms. Ducksworth was about to complete the purchase of a foreclosed house when it suddenly went off the market. Fannie Mae, the giant mortgage holding company that buys loans from commercial lenders, is pulling back sales of homes that might have been foreclosed in bad faith. “I gave up my rental thinking I would have a house,” said Ms.Ducksworth, a 28-year-old catering assistant. “Now I’m sharing a room with my son. What the hell is up with that?” With home sales this past summer at the lowest level in more than a decade, real estate is ill-prepared to suffer another blow. But as a scandal unfolds over mortgage lenders’ shoddy preparation of foreclosure documents, the fallout is beginning to hammer the housing market, especially in states like Florida where distressed properties are abundant. They are also waving off Fannie Mae from selling any of the foreclosed homes whose loans they sold to Fannie. The companies say they are reviewing their operations after disclosures that employees signed documents without determining the accuracy of the material, as is required by law. MORE FROM NYTIMES.COM WorldPoliticsBusiness Those reviews are throwing into limbo hundreds of thousands of foreclosures and pending home sales, analysts estimate, though the lenders and Fannie Mae have been mostly silent about precise numbers and other specifics. More broadly, the revelations about the sloppy paperwork are emboldening homeowners and law enforcement officials in many states to question whether lenders rightfully hold the notes underlying foreclosed properties — further chilling the housing market.

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