Reports indicate that the FHFA lacks the staff to adequately monitor mortgage giants Fannie Mae and Freddie Mac.
According to a report by the Office of the Inspector General (OIG) the Federal Housing Finance Agency (FHFA) lacks examiners to properly monitor Fannie Mae and Freddie Mac who it has in conservatorship.
“FHFA-OIG has identified shortfalls in the Agency’s examination coverage, particularly in the areas of Real Estate Owned and default-related legal services,” states the released report.
The Office of the Inspector General for the federal regulator said the FHFA “has far too few examiners” to properly handle its examination system to monitor Fannie Mae, Freddie Mac and the Federal Home Loan Banks.
The lack of staff has lead to the agency not examining Fannie Mae’s management of its retained attorney network or Freddie Mac’s management of its Designated Counsel Program.
The FHFA-OIG says that they are short on accredited examiners and this is part of the problem. The examination teams are said to be understaffed and only about one-third of its examiners are accredited.
Although the FHFA agrees with the claim that it has too few employees – the agency has developed a plan to hire about 26 examiners – it disagrees with the assertion that its undermanned unit is failing in its role.
In another report, the inspector general said the FHFA over the past five years “repeatedly found Fannie Mae had not established an acceptable and effective operational risk management program despite outstanding requirements to do so.” The auditor said the regulator hasn’t exercised its power as conservator to force the company to do as much, and recommends the FHFA compel Fannie to establish stronger controls.
“Fannie Mae’s lack of an acceptable and effective operational risk management program may have resulted in missed opportunities to strengthen the oversight of law firms it contracts with to process foreclosures,” according to the auditor’s report.
“Given Fannie Mae’s history of noncompliance, (the Office of the Inspector General) believes that the agency must exercise maximum diligence and take forceful action to ensure that Fannie Mae meets the agency’s expectations in this regard. Otherwise, FHFA’s safety and soundness examination program, as well as its delegated approach to conservatorship management, may be adversely affected.”
The report indicates that the FHFA is at fault for not relaying these issues to Congress and the public.
The FHFA-OIG recommends the FHFA “assess the extent to which examination capacity shortfalls may have adversely affected the examination program and develop strategies to mitigate these effects.”
The FHFA-OIG also recommended implementation of an accreditation program for its unaccredited examiners; and to address its shortage in examiners, suggested the FHFA hire contractors from other federal agencies.
The last recommendation was that the FHFA report to Congress annually on its examiner shortage and its progress in fulfilling that shortage.
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It sounds like the same issues we have been dealing with over the past number of years with both agencies. This administration had better get a handle on the FHFA or we are in for another disaster. But WHO do we turn to for help?