DETROIT — In early December, a senior executive at Fannie Mae assured members of the Senate Banking Committee in Washington that the mortgage giant was doing everything possible to address the foreclosure crisis.

“Preventing foreclosures is a top priority for Fannie Mae,” Terence Edwards, an executive vice president, told the panel. “Foreclosures hurt families and destabilize communities.”

Additional Photos

Leisa Fenton, 47, left, and her husband, Steven, 50, were foreclosed on last fall as they tried to work out a loan modification with Bank of America. Their home in Clarkston, Mich., was sold even although they had been assured it was safe while they worked with the bank. They are suing the bank and Fannie Mae and remain in the home while the case is pending. “We just keep praying the Lord is going to work it out,” Leisa Fenton said. William Archie/Detroit Free Press

But confidential documents obtained by the Detroit Free Press show that Fannie Mae has pushed an agenda at odds with those public assurances.

The records cover Fannie Mae’s foreclosure decisions on more than 2,300 properties, a snapshot from among the millions of mortgages that Fannie handles nationally.

The documents show that Fannie Mae has told banks to foreclose on some delinquent homeowners – those more than a year behind – even as the banks were trying to help borrowers save their houses, a violation of Fannie’s own policy.

Fannie Mae has publicly maintained that homeowners would not lose their houses while negotiating changes to mortgages under the federal Home Affordable Modification Program, or HAMP.

The Detroit Free Press also obtained internal records revealing that the taxpayer-supported mortgage giant has told banks that it expected them to sell off a fixed percentage of foreclosed homes. In one letter sent to banks around the country last year, a Fannie vice president made clear that Fannie expected 10 percent to 12 percent of homes in foreclosure to proceed to sale.

Taken together, the documents offer an unprecedented window into how Fannie decides whether to allow borrowers to exhaust all options to keep their homes.

Alan White, a law professor at Valparaiso University in Valparaiso, Ind., and a leading national expert on the foreclosure crisis, reviewed the records for the Detroit Free Press and said they show Fannie Mae – which is regulated by the Federal Housing Finance Agency, or FHFA – is sabotaging the nation’s foreclosure prevention efforts and helping drive down home values.

“Fannie just wants to clean up its balance sheet and get these loans off the books while taxpayers are eating these losses,” White said, referring to the multibillion-dollar federal bailout of Fannie Mae in 2008 and the rising cost to taxpayers.

“And Treasury and the FHFA are letting them get away with it,” he said. “It’s a huge waste. Wealth is being destroyed, people are losing houses needlessly, and taxpayers are losing money.”

Fannie Mae officials declined to be interviewed and would not address the issues raised in the records obtained by the Free Press, including a lengthy series of questions provided by email.

But a former Fannie Mae executive, Javid Jaberi, whose name is on some of the documents, said the internal records merely reflect an effort by Fannie Mae to get banks to respond more quickly when loans are delinquent, even if that means pushing some foreclosed homes to sale.

In an interview last Wednesday, Jaberi said there is plenty of blame to go around. Borrowers often didn’t understand their options. Banks weren’t doing enough to help borrowers get mortgage relief. And HAMP’s documentation rules, he said, were too complex.

“Everyone is to blame,” Jaberi said, including Fannie Mae.

Fannie spokesman Andrew Wilson said that Fannie is “committed to preventing foreclosures whenever possible. We encourage homeowners to reach out as early as possible … to pursue modifications and other foreclosure prevention solutions.”

Various lenders – Bank of America, GMAC Mortgage, CitiMortgage and Chase – would not discuss Fannie’s policies.

Fannie Mae and many of the nation’s top banks have faced much criticism for doing little to stem foreclosure sales, which grew by 1.6 million last year.

Investigations by other news media outlets showed that Fannie Mae (and the banks that directly service home loans) help only a sliver of people who seek relief, and often delay or bungle applications for modifications. Other reports showed Fannie has punished banks that were too slow to foreclose.

The documents obtained by the Free Press indicate, for the first time, that Fannie wasn’t simply indifferent to helping homeowners, but launched a concerted effort to force seriously delinquent borrowers from their homes.

Fannie’s foreclosure policy – what an August 2010 document calls “our new delay initiative” – focused on homeowners more than 12 months late on their mortgages, including people actively negotiating loan modifications. That stance conflicts with the government’s (and Fannie’s) rules, which are meant to insulate people while they seek loan relief under HAMP.

Mortgage companies, of course, can’t wait forever for delinquent borrowers to catch up on their payments. But critics argue that Fannie Mae’s confidential foreclosure policy is not only at odds with its public assurances, but adds to the inventory of vacant homes across the nation and lowers property values for everyone.

According to White, the Valparaiso professor, foreclosing on a home typically costs Fannie Mae far more than a successful loan modification. But, he and others say, Fannie is willing to absorb higher losses because it knows that taxpayers – not Fannie Mae – will eventually reimburse the loss.

Since 2008, when the government took over Fannie Mae and its sister company, Freddie Mac, the mortgage giants have cost taxpayers $141 billion, and the bill could eventually reach as high as $389 billion.

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