Fannie Ordered to Stop 3rd-Party REO Activity

The Department of Housing and Urban Development has ordered Fannie Mae to stop the management and sale of third-party real estate owned because it is "inconsistent" with their government charter as a secondary-market agency."Yesterday, HUD ordered Fannie Mae to cease and desist its third-party REO management and servicing activities," HUD Secretary Alphonso Jackson told the Senate Banking Committee on April 7. HUD first learned about Fannie's providing REO management services to other companies two weeks ago from the Office of Federal Housing Enterprise Oversight. HUD responded by asking the government-sponsored enterprise for additional information by April 27. "Fannie Mae will be working with HUD to address and comply with the directive," Fannie spokesman Brian Faith said. HUD Assistant Secretary John Weicher clarified that it is permissible for Fannie and Freddie Mac to manage and sell REO that results from loans they purchased or securitized but that later go into default and foreclosure. Fannie and Freddie list those REO properties on their websites. "They certainly have the right to dispose of their own REO," Mr. Weicher said. "That is not at issue."