A foreclosure/price reduced sign stands in front of a home for sale in Miami, Florida.
A foreclosure/price reduced sign stands in front of a home for sale in Miami, Florida. - 
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Adriene Hill: Now, remember last year when we all started talking about foreclosure abuse? Like robosigning, where thousands of foreclosures were done every day without legal review?

Turns out Fannie Mae and its federal regulator knew all about that. That's according to a new report out from the inspector general today.

Joining me now is Gregory Warner, good morning.

Gregory Warner: Good morning.

Hill: So, what do we know?

Warner: Fannie Mae, the nation's largest mortgage investor, hired a network of law firms to handle foreclosures and those law firms were paid by volume, and they cut corners. They were routinely filing false pleadings and affidavits.

Now, this Inspector General report out today says Fannie Mae knew about those abuses from way back, and so did regulators, but little was done until the media reported it in 2010.

I called Susan Wachter, she a professor of real estate and finance at the Wharton School. She says the problem isn't fixed.

Susan Wachter: We, in this crisis and still to this day, lack a real-time public oversight of what is this critical industry.

Hill: So, what happens now?

Warner: Fourteen banks have agreed to fund an independent review of foreclosures. This means that any homeowner who entered some state of foreclosure in 2009 or 2010 can apply for an appeal -- we're talking 4.5 million homeowners eligible to apply.

Going back to Susan Wachter, she says we're really witnessing the birth of a clean up industry, where the amount of money that goes to lawyers to clean up this mess is going to be huge compared to whatever money gets paid to homeowners in damages.

Hill: Marketplace's Gregory Warner, thanks so much.

Warner: Thanks a lot, Adriene.