The Federal Housing Finance Agency is expanding its on-site examination teams at Fannie Mae and Freddie Mac to monitor their servicing activities while taking a closer look at risks posed by counterparties.
"FHFA recognized that a dedicated examination staff to monitor and coordinate oversight activities would enhance the agency's overall efficiency and effectiveness," the agency said in response to a FHFA Office of Inspector General report.
A new OIG report is highly critical of FHFA's oversight of Freddie Mac's servicing activities and faults the GSE regulator for failing to recognize the operational risks Freddie faces due to its reliance on servicers until late 2010.
It also faulted the agency for not seeking information from other federal banking agencies about their reviews on individual servicing contractors.
In response to the OIG findings, FHFA says it will work more closely with other federal regulators and begin to conduct reviews of servicers that are not subject to supervision by the federal banking agencies.
"Through its ongoing supervisory process, FHFA will continue to make Freddie Mac's oversight of servicers a key priority to determine if risks are being properly managed and that credit loss savings are reasonably achieved," according to FHFA deputy director Jon Greenlee.
The OIG report notes that Freddie suffers a 50% credit loss on foreclosed loans. "Thus avoiding foreclosure through a loan modification can potentially generate significant credit loss savings,” the IG said.
