FHFA Needs to Exercise More Oversight of Servicers, Watchdog Says
The Federal Housing Finance Agency and its inspector general are at odds over the way Fannie Mae and Freddie Mac servicers should be monitored to ensure they are properly assisting distressed borrowers.
The FHFA’s Office of Inspector General is pressuring the regulator of the government-sponsored enterprises to develop and implement a process for reviewing servicer performance.
FHFA established a Servicing Alignment Initiative (SAI) in April 2011 to ensure servicers respond to borrower requests for assistance within specified time frames and conduct loan modifications and foreclosures pursuant to certain procedures and deadlines.
Yet the regulator has “not compared servicer performance against SAI work stream goals, even though SAI has been in effect for nearly three years,” the OIG report says. “Moreover, FHFA has offered no plan for assessing the effectiveness and success of SAI.”
FHFA generally leaves the oversight of servicers to Fannie and Freddie. The GSEs conduct SAI-related servicer quality reviews of servicers. One review of 18 servicers in October 2013 resulted in 63 noncompliance findings in multiple areas, according to OIG auditors.
Another internal GSE review of the overall servicer quality involved 19 of the top 30 servicers. The review rated four servicers as “needs to improve” and five as “needs significant improvement.”
The OIG auditors believe FHFA should be proactive in its approach with these servicing deficiencies.
But the FHFA points out that Congress didn't give the agency the authority to police servicers.
“Consequently, FHFA is not in a position to perform any supervisory activities or directly monitor the servicers,” FHFA says in letter in response to the OIG's recommendation. The Feb. 11 letter also notes that FHFA has delegated authority for overseeing servicer compliance to the GSEs.
“We believe the response indicates that the agency does not plan alter its limited oversight of SAI,” the OIG report says.