Home >> News >> Government >> Report Slams FHFA, Freddie for Poor Servicer Oversight
Print This Post Print This Post
The inspector general of the Federal Housing Finance Agency released a report Tuesday that criticizes the agency, Fannie Mae, and Freddie Mac for a series of ongoing oversight problems with mortgage servicers. The document charges that the FHFA failed to implement service guidelines for the mortgage company last year and portrays today├â┬ó├óÔÇÜ┬¼├óÔÇ×┬ós environment as one in which the agency, GSEs, and servicers all punt responsibility down the ladder. It also alleges that Fannie Mae and Freddie Mac routinely fail to swap servicer information.

Report Slams FHFA, Freddie for Poor Servicer Oversight

The inspector general of the ""Federal Housing Finance Agency"":http://www.fhfa.gov/Default.aspx (FHFA) released a report Tuesday that criticizes the agency, ""Fannie Mae"":http://www.fanniemae.com/, and ""Freddie Mac"":http://www.freddiemac.com/ for a series of ongoing oversight problems with mortgage servicers.

[IMAGE]

The ""document"":http://www.fhfaoig.gov/Content/Files/AUD%202012-001.pdf charges that the FHFA failed to implement service guidelines for the mortgage company last year and portrays today's environment as one in which the agency, GSEs, and servicers all punt responsibility down the ladder.

""FHFA relies on the Enterprises individually to monitor counterparty risk as part of their ongoing risk management activities,"" the report said. ""And, similar to FHFA's reliance on Fannie Mae and Freddie Mac, the Enterprises routinely rely on mortgage servicers to manage the loans in their portfolios.""

It said that lack of oversight persists despite calls from ""numerous GSE executives"" to aggressively revisit servicer contracts, which Freddie Mac approached by creating so-called account plans.

[COLUMN_BREAK]

The office recommended that Freddie Mac address underperforming servicers and others with high-risk loan portfolios ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô holdover problems that the office said ""played a significant role"" in the financial crisis.

It also alleges that Fannie Mae and Freddie Mac by and large operate independently of each other, despite the fact that the two companies routinely share some 300 different servicers.

In one instance, the report said that contracts with servicers from September last year failed to require servicer access for the FHFA, preventing the agency from reviewing compliance with terms and conditions despite responsibilities it had assumed three years before.

""Although it has undertaken affirmative measures, FHFA has not developed sufficient regulations or guidance governing the Enterprises' oversight and risk management of counterparties, such as servicers,"" it added.

The office of inspector general ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô which reports to Congress independently ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô recommended that the FHFA act to uncover and stymie servicer risk by devising new regulation, orders, and guidance for the companies.

""When the Enterprises turn to servicers to perform their responsibilities, the vendors' activities should be subject to the same risk management monitoring that FHFA would perform if the Enterprises were conducting the contracted activities themselves,"" the report said.

It also called on the FHFA to take appropriate enforcement actions against non-compliant servicers, follow through with a so-called business plan to identify high-risk loans, and more thoroughly supervise counterparty servicers contracted with Freddie Mac.

About Author: Ryan Schuette

Ryan Schuette is a journalist, cartoonist, and social entrepreneur with several years of experience in real-estate news, international reporting, and business management. He currently lives in the Washington, D.C., area, where he freelances for DS News and MReport.
x

Check Also

Single American Homeowners Becoming More Prominent in 2024

No partner? No problem. A new survey from Pennymac revealed that while down payments are more expensive for single Americans buying a home, more than half of respondents believe waiting to get married or a significant other to buy a home is and outdated idea.