Bryan Cohen Jun. 3, 2014, 6:17pm

BOSTON (Legal Newsline) - Massachusetts Attorney General Martha Coakley sued the Federal Housing Agency and mortgage giants Fannie Mae and Freddie Mac on Tuesday over their alleged refusal to engage in foreclosure buyback programs.

Coakley, in a complaint filed in Suffolk Superior Court, called the alleged refusal to take part in the foreclosure buyback programs unfair and said that it illegally caused Massachusetts families to lose their homes.

Fannie Mae and Freddie Mac, currently under FHFA conservatorship, have allegedly refused to comply with the August 2012 Massachusetts law "An Act to Prevent Unnecessary and Unreasonable Foreclosures." The first-in-the-nation law, proposed by Coakley and passed by the state legislature to prevent unnecessary foreclosures, prohibits creditors from blocking home sales to non-profits if the non-profits plan to resell the property to its former homeowner.

"It makes no sense for our federal government to stand in the way of this work to help struggling families stay in their homes, and it is illegal for Fannie and Freddie to do this in Massachusetts," Coakley said. "For too long, Fannie and Freddie have been roadblocks to progress in addressing this foreclosure crisis, and I urge them to immediately reverse their policy on this common-sense program."

Coakley's complaint cites Suero v. Freddie Mac and alleges that two of FHFA's policies violate state law. According to the complaint, the "arm's length transaction policy" held by Fannie and Freddie prohibits property sales to non-profits that resell to original homeowners, while the "make whole" policy has the same effect, preventing the companies from accepting anything less than the outstanding loan amount from the former homeowner or anyone seeking to resell or rent to the former homeowner.

A preliminary injunction was issued in Suero v. Freddie Mac after Boston Community Capital's "Stabilizing Urban Neighborhoods" initiative and the 2012 Massachusetts law were cited, which prevented the foreclosure and sale of the Suero home in Dorchester.

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