A new report from the inspector general of the Federal Housing Finance Agency slams the agency for delegating too much management authority to Fannie Mae and Freddie Mac on major business decisions including servicing transfers, and the tightening of underwriting standards.
The IG writes that as conservator, the FHFA should have kept a close watch on GSE underwriting standards but instead had a limited role.
Regarding servicing transfers, inspectors concluded that the entire program was never “reviewed or approved by the FHFA as conservator.”
The IG did conclude that when it came to GSE servicing transfers, the agency “was advised” and had no objection on at least one transaction.
The FHFA and the U.S. Treasury took control of Fannie and Freddie four years ago. Treasury owns their preferred stock.
The IG is also critical of giving the GSEs the authority to enter into legal settlements of less than $50 million without agency approval.
A spokeswoman for the FHFA took exception with the criticisms. In a prepared statement she noted that the agency “clearly stated at the inception of the conservatorships in September 2008 that we would be delegating most business decisions back to the companies’ management and boards of directors that had been newly appointed by the FHFA.”
She added that the GSEs have combined assets of $5 trillion, 12,000 employees and more than 1,000 counterparties. “The volume of daily business decisions, large and small, is extremely high,” she said.
