The FHFA has ordered Fannie and Freddie to dismiss their notorious network of foreclosure attorneys.

The Federal Housing Finance Agency (FHFA), the government body that oversees federal lenders Fannie Mae and Freddie Mac, has ordered the two financial bodies to phase out their network of foreclosure attorneys in the wake of the robo-signing foreclosure frauds, reports Housing Wire’s Jon Prior.

Part of a new string of organizational efforts to consolidate the operating procedures of Fannie, Freddie and other government sponsored entities (GSEs), the lenders would be required to gradually release their contracts with a select number of foreclosure attorneys, and instead allow mortgage servicers to choose their own attorneys to process defaults and foreclosures.

As Bloomberg reports, the decision to liquidate the “Retained Attorney Network” that the lenders use was reactionary. In the latter months of 2010, news broke that foreclosure operators were mishandling paperwork and rushing through the foreclosure process for the sake of speed, a discombobulating process that led to improper evictions and wrongful foreclosure filings.

In September, the FHFA’s Office of Inspector General made it official, reporting that Fannie Mae did not effectively monitor the conduct of its 191 network law firms.

The scandal put numerous foreclosure agencies on the spot, and many suspended foreclosure activity to more affectively manage their various filings. Because of that lull, foreclosures are posting dramatic increases, as agencies resume their business.