An Open Letter to Freddie Mac’s CEO on Your Anti-Competitive Business Practices

John A. Koskinen
Interim Chief Executive Officer
Freddie Mac
8200 Jones Branch Drive
McLean, VA 22102-3110

Dear Mr. Koskinen:

Considering the state of California’s unemployment across its real estate industry, created in part by the most severe mortgage crisis in American history, I’m disturbed by some of Freddie Mac’s most recent anti-competitive actions.

It is surprising to see the new Freddie Mac, under the auspices of the U.S. government, engaging in “questionable” business partnerships that require all buyers of Freddie Mac California REO properties to agree to the use of one company’s Natural Hazard Disclosure (NHD) report – thereby cutting out an entire industry from a consumer’s choice. Specifically Freddie Mac is now requiring the exclusive and sole use of FANHD natural hazard disclosure reports.

As you know, this is the ONLY disclosure source that can inform a buyer of potential problems that may affect the desirability and value of their new home.

This deal seems designed to kill a highly competitive real estate industry, hurt dozens of companies and put hundreds if not thousands of employees out of work.

This exclusive arrangement unfairly “corners” the California market for REO properties and has in fact created a monopoly to the benefit of one company, First American Title’s FANHD. As we all know, eliminating the competition among NHD report providers in the REO market is unethical and against the interests of the buyers.  If fact it could be considered much worse.

The threat to harm competition is contemplated in the California Business & Professions Code Section 17200 as unfair business practices. In addition, from what I can find, this arrangement fails to comply with federal and California antitrust and unfair competition laws, and is in violation of the Sherman Act.

Natural Hazards Disclosure Reports are a settlement service as defined by, and regulated by HUD (the Department of Housing and Urban Development). Consequently, this arrangement certainly appears to be in violation of RESPA Section 8.

And your decision to partner with First American Title is most interesting since no panel has certified this company’s report to be a better or more accurate product than anyone other vendor.  To some, First American Title’s recent hire of former Freddie Mac’s Executive Vice President and CFO, Anthony “Buddy” Piszel raises eyebrows.  Could this new agreement have been part of a package deal in his hiring?

First American Title doesn’t have a pristine reputation either. It is frequently covered in the media as a repeat offender for RESPA violations, having been forced to settle and pay penalties in numerous government lawsuits across the United States.

Please Mr. Koskinen, don’t wait until your personal reputation is besmirched for letting Freddie Mac engage in what the court of public and legal opinion may consider to be a clear RESPA violation and illegal.

California, its people, its institutions and its government need your personal intervention to put an end to this exclusive arrangement between Freddie Mac and FANHD which ultimately will drive First American competitors out of the real estate market, further additional unemployment, reduce badly needed taxes and most importantly be detrimental to the interests of California consumers.

The right to choose an NHD provider should be left to the consumers of the state of California.

I look forward to your reply,

Sincerely,

Serena Ehrlich
Publisher and Editor
RE-INSIDER

CC:      FHFA (Federal Housing Finance Agency)
GAO (General Accounting Office)
Senator Feinstein
Senator Boxer

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