Republican seeks hearing on Fannie Mae whistleblower

Introduction

The top Republican on the House Financial Services Committee is asking for a hearing on a whistleblower’s claims that Fannie Mae put its own bottom line ahead of helping distressed homeowners with a federal foreclosure prevention program, allegations reported last week by the Center for Public Integrity.

Rep. Spencer Bachus of Alabama, in a letter to committee chairman Barney Frank, a Massachusetts Democrat, asked for a hearing to examine whether Fannie Mae executives mishandled the administration of the Home Affordable Modification Program (HAMP). As first reported by the Center, former Fannie Mae executive and consultant Caroline Herron filed a federal lawsuit accusing the giant home mortgage company of pushing borrowers into short-term trial modifications, rather than permanent modifications, because of incentive payments Fannie Mae stood to get from the Treasury Department for trial modifications booked before the end of 2009.

“These allegations are of particular concern, not only because taxpayers have invested more than $85 billion in Fannie Mae to offset its losses, but also because it is being reported that the Administration might order the government-controlled mortgage finance company to forgive many Americans’ mortgage debts later this month,” Bachus said in his letter. The lawmaker said he wants Fannie Mae executives, its regulator, and whistleblower Herron to testify at a hearing as soon as possible after the August recess.

Bachus and other Republicans have criticized Frank for not including Fannie Mae reform in the massive, 3,200-page financial regulation overhaul signed into law a few weeks ago. Frank has said he prefers to take up the issue as part of a broader look at housing finance. The Obama administration is holding a conference next week to discuss the government’s options to eventually end the federal bailout of Fannie Mae and Freddie Mac, which now stands at about $145 billion.

A spokesman for Frank, who controls the House Financial Services Committee schedule, office had no immediate comment on the Bachus request.

“I don’t think at this point he (Frank) has a position on it,” spokesman Harry Gural said. “It’s easy to put out a press release. It takes more thought to decide if we’re going to have a hearing.”

A Republican spokesman for Bachus did not respond to a Center request for comment.

Update: A spokesman for Chairman Barney Frank of the House Financial Services Committee said Fannie Mae and Freddie Mac issues will be discussed at a subcommittee hearing on Sept. 15 and at a full committee hearing on Sept. 29. Both hearings were scheduled prior to the Center for Public Integrity’s publication of an investigation into allegations by a Fannie Mae whistleblower, said Frank spokesman Harry Gural. It is not yet known if the whistleblower, Caroline Herron, will be called to testify at either hearing, he said.