Fannie Mae and Freddie Mac have dropped Steven J. Baum P.C., New York’s largest foreclosure law firm, from its network of firms that process the foreclosures of mortgages owned by the government-sponsored enterprises. The servicers of Freddie Mac and Fannie Mae-owned mortgages can no longer refer foreclosure cases to the Baum firm, though the firm will retain the cases already referred to it. Freddie Mac’s bar on new referrals also includes bankruptcies and was announced on Nov. 10. Fannie Mae’s decision to bar new referrals was confirmed yesterday. Spokesmen for Fannie Mae and Freddie Mac would not comment on the reasons behind the decisions.

Steven J. Baum called the decisions of Fannie Mae and Freddie Mac “unfortunate.” “It seemed to be based more on politics than performance,” he said in an e-mailed statement, declining to elaborate.

The embattled firm has come under fire most recently for a 2010 Halloween office party where staff dressed as homeless people. The firm has apologized but Congressman Elijah Cummings, D-Md., has requested information on the firm’s practices and the party. Meanwhile, the Southern District U.S. attorney last month announced the settlement of a six-month probe of the firm that will result in a $2 million fine and an overhaul of its practices (NYLJ, Oct. 7).

“The law firm and its management and employees are going through a very difficult period because of the intense scrutiny of late and while people want to think the mortgage foreclosure crisis is because of the firm and other law firms that is not the case,” Mr. Baum said. “The firm has no control over what others might do as far as the business is concerned; the focus at the moment is to do the best job possible for its clients.”

The Baum firm was one of six New York state firms on Freddie Mac’s list and one of eight on Fannie Mae’s. Separately, Fannie Mae and Freddie Mac are in the process of dismantling their attorney networks after a transition period (NYLJ, Oct. 20).

@| Andrew Keshner can be contacted at akeshner@alm.com.