FHFA-OIG: Placing Our Mission in Perspective
Recently, an article was published discussing the work of my office, the Federal Housing Finance Agency Office of Inspector General.
The piece, titled “Mortgage Cops Taking Tough Stance” (Sept. 13, 2012), implies that my office is going to “lock up” anyone who strategically defaults on their mortgage.
This is not the case, and I’d like to put in context what we are and are not doing.
Congress created the Federal Housing Finance Agency in the midst of the financial crisis, just six weeks before Fannie Mae and Freddie Mac were placed into conservatorships overseen by the FHFA.
As conservator, the FHFA oversees both entities—which continue to own or guarantee a majority of all new residential mortgages in the United States, and which continue to have a very large impact on the domestic housing market.
FHFA-OIG was created at the same time as FHFA.
Among its missions are to:
• Ensure that the Federal Housing Finance Agency is effectively regulating Fannie Mae and Freddie Mac.
• Confirm that the Federal Housing Finance Agency is appropriately preserving and conserving Fannie Mae’s and Freddie Mac’s assets.
• Detect and prevent waste, fraud and abuse in areas overseen by the Federal Housing Finance Agency.
My office goes about its work in two distinct ways.
First, we regularly issue written reports that analyze the machinery of housing finance overseen by FHFA and then recommend areas of improvement, which can translate into significant revenues or cost savings that ultimately benefit taxpayers.
For instance, we recently made recommendations that may ultimately lead Freddie Mac to recover an additional $3.4 billion in mortgage repurchases.
In the strategic default area, FHFA-OIG is currently auditing FHFA’s oversight of Fannie Mae and Freddie Mac’s efforts to recover losses from foreclosure sales.
As part of this audit, FHFA-OIG intends to look at how Fannie Mae and Freddie Mac handle strategic defaulters: mortgage holders with the necessary financial resources to pay their mortgages, but who nonetheless decide to walk away from their debts.
When the audit is completed we expect to report findings of fact and make recommendations, if appropriate, for actions that can be taken to improve FHFA’s oversight and Fannie Mae and Freddie Mac’s recoveries.
This constitutes the extent of our current work on strategic defaulters.
Second, we work closely with federal, state, and local criminal and civil law enforcement agencies to combat mortgage fraud and other significant offenses that have emerged in the wake of the financial crisis.
This includes fraud in the sale of residential mortgage-backed securities, foreclosure rescue scams, and abuses in the foreclosure process.
For example, we recently participated in a criminal investigation that led the Department of Justice to file charges against 11 defendants in connection with a multimillion-dollar mortgage rescue scheme that defrauded 4,000 homeowners facing foreclosure.
Our investigations may extend to the type of false statement cases cited in the article (e.g., an individual lying on a loan application), but larger cases involving multiple victims or comparatively large dollar losses are FHFA-OIG’s primary focus.
In sum, the article overstates the nature and extent of our work on strategic defaulters.
My office is not “on the prowl for people who owe [Fannie Mae or Freddie Mac] money.”
We are, however, committed to combating mortgage fraud and improving the effectiveness and efficiency of the FHFA’s programs and operations while housing markets remain fragile and the FHFA, Fannie Mae, and Freddie Mac continue to be key players.