Correction and Clarification
In a story that appeared on the National Mortgage News website Thursday, August 16, the name of an official from the Inspector General’s office of the Federal Housing Finance Agency was misspelled. The correct spelling is Heath Wolfe, who is an assistant inspector general at the agency. Also, NMN incorrectly reported on the number of variances authorized by Fannie Mae, which Wolfe mentioned in a presentation before the American Association of Residential Mortgage Regulators in Boston. The correct figure is 12,000, not 1,200.
A spokeswoman for the IG’s office also disputed some of the quotes attributed to Wolfe and the context of those quotes. She said Wolfe never said the following: “For every dollar Fannie Mae and Freddie Mac paid out, we are going to sue for $3.” She also disputed a quote where Wolfe was reported as saying that going after lenders “has never been done before.” NMN reported that the FHFA IG will investigate seller/servicers “which pose the highest risk” to the GSEs. The reference to going after lenders was meant to be in reference to FHFA. The spokeswoman confirmed that this has never been done before.
She also said a quote regarding the agency “digging down deep” on underwriting deficiencies was taken out of context and instead was tied to a published report on Freddie Mac’s oversight of mortgage servicing. She also clarified that although Wolfe is involved with audits, he is not in charge of them for the office. The reporter on the story, Lew Sichelman, stands by his reporting.
—Editor’s note: below is the corrected version of the story
Auditors at the Federal Housing Finance Agency are in the process of identifying lenders which sold “materially deficient” mortgages to Fannie Mae and Freddie Mac and will bring civil damage claims against these seller/servicers.
The intent, said Heath Wolfe, an assistant inspector general in FHFA’s Office of the Inspector General, is to finger “sellers which pose the highest risk” to Fannie and Freddie.
Going after such lenders “has never been done before,” Wolfe told a group of state regulators meeting in Boston.
“Once we ID them,” he said at the American Association of Residential Mortgage Regulators’ annual conference, “we’re going to send them a nice little letter telling them, ‘We’re coming’!”
FHFA, the regulator of Fannie and Freddie, became their conservator as well in September 2008.
Wolfe said he has already met with the Justice Department’s civil division and expects DOJ to bring triple-damage suits against the worst offenders. “For every dollar Fannie Mae and Freddie Mac paid out, we are going to sue for $3,” he said.
The FHFA official said his staff is “digging down deep” to find lenders which violated Fannie and Freddie’s underwriting requirements. But that might not be as difficult as it sounds, he added, because the GSEs’ “top five” seller/servicers account for 63-67% of their business.
Wolfe told AARMR’s annual conference that bad loans “are costing you and I money every day.”
He also said that during the height of the housing boom, Fannie Mae alone authorized more than 12,000 variances to its underwriting guidelines. “These variances,” he said, “go to the heart of problem loans.”
The GSEs have been making their seller/servicers
