Fannie and Freddie heart foreclosure mills

We've told you about how big banks like Bank of America, JP Morgan Chase and Wells Fargo used "foreclosure-mill" law firms -- known for cutting corners on paperwork, or worse -- to help speed struggling borrowers from their homes, in some cases improperly. A task force of all 50 state attorneys general is currently probing the issue.

But a lengthy Washington Post report makes clear that the problem wasn't limited to the private lenders. Government-backed Fannie Mae and Freddie Mac hired law firms that used those same practices. In fact, they hired the very same Florida-based lawyer, David J. Stern, who we named the poster boy for shady foreclosure practices.

Asked in a 2000 deposition why Fannie Mae had brought in Stern's firm, despite clear evidence of red flags, Fannie Mae associate general counsel Susan Reid replied: "We felt that timelines and the time it took to foreclose on a piece of property ... could be improved." With "every month" she said, "we're losing money."

And the Post adds that Fannie and Freddie send their contractors a report card every month, grading them on how fast they're completing foreclosures.

In other words, Fannie and Freddie turned to Stern's firm and others like it for the same reason the private lenders did: to maximize profits by moving as many borrowers into foreclosure as quickly as possible -- even if it meant they played fast and loose with the rules to do it.

(Photo: Getty Images)