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to FHFA Scorecard Directive, at 48, 21, 76 (December 17, 2012). Accessed: August 5, 2013, at www.fhfa.gov/webfiles/25160/ FNMMF2012ScorecardResponse.pdf. 77 Freddie Mac, Freddie Mac Prices Transaction to Sell Off Residential Mortgage Credit Risk (July 24, 2013). Accessed: August 5, 2013, at http:// freddiemac.mwnewsroom.com/press-releases/ freddie-mac-prices-transaction-to-sell-off-residenotcqb-fmcc-1037019. 78 Id. 79 Federal Housing Finance Agency, Statement of FHFA Acting Director Edward J. DeMarco on Freddie Mac Risk-Sharing Transaction (July 24, 2013). Accessed: August 5, 2013, at www.fhfa.gov/webfiles/25374/ FinalFRECRTstatement072413.pdf. 80 Federal Housing Finance Agency, “Contract the Enterprises Dominant Presence in the Marketplace While Simplifying and Shrinking Certain Operations,” Conservatorship Strategic Plan: Performance Goals for 2013, at 2. Accessed: August 15, 2013, at www.fhfa.gov/ webfiles/25023/2013EnterpriseScorecard3413. pdf. 81 Federal Housing Finance Agency, FHFA Releases Fifth Annual Report to Congress; Report Details Examinations of Fannie Mae, Freddie Mac, and 12 Federal Home Loan Banks (June 13, 2013). Accessed: August 5, 2013, at www.fhfa.gov/ webfiles/25321/ReporttoCongress061313.pdf. 82 Federal Housing Finance Agency, “Rating,” 2012 Report to Congress, at 17, 23 (June 13, 2013). Accessed: August 5, 2013, at www.fhfa.gov/ webfiles/25320/FHFA2012_AnnualReport.pdf. 83 Id., “Federal Housing Finance Oversight Board Assessment,” at iv. 84 Id., “Report of Examinations of the Federal Home Loan Banks,” at 37-48. 85 Id., “Office of Finance,” at 49. 86 U.S. Senator Bob Corker, Issues & Legislation: Housing Finance Reform and Taxpayer Protection Act. Accessed: August 5, 2013, at www.corker.senate.gov/public/index.cfm/ housing-finance-reform. 87 U.S. Senator Bob Corker, “Title 5: Wind Down of Fannie Mae and Freddie Mac,” “Title 3: Transfer of Power to FMIC from FHFA,” “Title 1: Establishment of the Federal Mortgage Insurance Corporation (FMIC),” Housing Finance Reform and Taxpayer Protection Act, at 1. Accessed: August 5, 2013, at www.corker.senate. gov/public/_cache/files/f6951d82-1a9c-40d2- 9291-dcdd5c153cbe/06-25-13%20GSE%20 reform%20Summary.pdf. 88 Id., “Title 1: Establishment of the Federal Mortgage Insurance Corporation (FMIC),” “Title 2: Authorities and Duties of the FMIC,” at 1. 89 Committee on Financial Services, Committee Leaders Announce PATH Act to End Taxpayer Bailout and Create Sustainable Housing Finance System (July 11, 2013). Accessed: August 5, 2013, at http://financialservices.house.gov/news/ documentsingle.aspx?DocumentID=342165. 90 Committee on Financial Services, “Title I: Wind-Down of Fannie Mae and Freddie Mac,” Protecting American Taxpayers and Homeowners (PATH) Act – Section by Section Summary, at 1. Accessed: August 5, 2013, at http:// Semiannual Report to the Congress • April 1, 2013–September 30, 2013 125
financialservices.house.gov/uploadedfiles/bills- 113hr-pih-pathdd-ss.pdf. 91 Id., “Title III: Building a New Market Structure,” at 9. 92 White House, Remarks by the President on Responsible Homeownership (August 6, 2013). Accessed: August 8, 2013, at www. whitehouse.gov/the-press-office/2013/08/06/ remarks-president-responsible-homeownership. 93 White House, Fact Sheet: A Better Bargain for the Middle Class: Housing (August 5, 2013). Accessed: August 8, 2013, at www. whitehouse.gov/the-press-office/2013/08/05/ fact-sheet-better-bargain-middle-class-housing. 94 White House, Remarks by the President on Responsible Homeownership (August 6, 2013). Accessed: August 8, 2013, at www. whitehouse.gov/the-press-office/2013/08/06/ remarks-president-responsible-homeownership. 95 Federal Housing Finance Agency, FHFA Announces Settlement with UBS, at 1 (July 25, 2013). Accessed: August 5, 2013, at www.fhfa. gov/webfiles/25377/UBSSettlement072513.pdf. 96 Federal Housing Finance Agency v. UBS Americas Inc., Civil Complaint (S.D.N.Y.), at 5, 1, 3 (July 27, 2011). Accessed: August 5, 2013, at www. fhfa.gov/webfiles/21841/FHFAvUBSstamped. pdf. 97 Federal Housing Finance Agency, FHFA Announces Settlement with UBS, at 1 (July 25, 2013). Accessed: August 5, 2013, at www.fhfa. gov/webfiles/25377/UBSSettlement072513. pdf. Federal Housing Finance Agency, FHFA Sues 17 Firms to Recover Losses to Fannie Mae and Freddie Mac, at 1 (September 2, 2011). Accessed: August 5, 2013, at www.fhfa.gov/webfiles/22599/ PLSLitigation_final_090211.pdf. 98 In our last semiannual report, OIG summarized the enterprises’ history, the causes of their liquidity problems during the recent housing finance crisis, and FHFA’s strategies for restoring the enterprises’ financial stability. Against this backdrop, we then discussed the major proposals to reform the nation’s housing finance system. 99 Thh e factors discussed herein derive from OIG’s audit, evaluative, investigative, and other efforts, and thus, there may be factors—or attributes of factors—that are not discussed but are nonetheless important to a safe, stable, and liquid mortgage market. For example, strong oversight of capitalization is critical to a vibrant secondary mortgage market, but it has been reported that prior to the conservatorships, the enterprises were required to hold very little capital to protect against losses (i.e., 0.45% to back their guarantees of MBS and 2.5% to back the mortgages in their portfolios; this compared to bank and thrift capital requirements of at least 4% of mortgage assets). Further, shortly before the commencement of the conservatorships, FHFA’s predecessor determined that the enterprises were adequately capitalized. See Financial Crisis Inquiry Commission, “Fannie Mae and Freddie Mac: ‘The Whole Army of Lobbyists,’” “2006: ‘Increase Our Penetration Into Subprime,’” The Financial Crisis Inquiry Report: Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States, at 39, 181 (January 2011). Accessed: September 30, 2013, at http://fcic-static.law.stanford.edu/ cdn_media/fcic-reports/fcic_final_report_full.pdf. It is not OIG’s intention to discount these other factors or attributes; rather, OIG determined that 126 Federal Housing Finance Agency Office of Inspector General
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Federal Housing Finance Agency Offi
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Section 3: Lessons for Housing Fina
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OIG’s Accomplishments from 2010 t
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A Message from the Acting Inspector
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insures mortgages against credit lo
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Semiannual Report to the Congress
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in a number of criminal and civil i
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Figure 3. Scoring of Investor Quali
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and provide for financial consequen
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Figure 5. Agreements Between Fannie
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2010 to 2012, but the attrition rat
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Figure 8. Estimated Enterprise Aggr
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operations that pose the greatest r
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poor financial condition, Appalachi
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fraud and wire fraud involving a fi
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This was a joint investigation with
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y falsified, forged, and altered do
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Short Sale Schemes A short sale occ
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This was a joint investigation with
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at Appalachian concealed past due l
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indemnification payments that OIG p
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the SEC, and others. In July 2013,
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Figure 10. Overview of the Enterpri
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Figure 12. Enterprises’ Annual Ne
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Figure 14. Home Price Index 2011 Th
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educe the principal balance of Trea
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Figure 17. FHLBanks’ Net Income f
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multifamily housing lending busines
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The bill would replace the enterpri
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mortgage credit. For its part, the
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Figure 20. Reform Models and Reform
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Multifamily We have also found indi
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Based on recent history, a reformed
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Figure 26. The Mortgage Servicing P
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Even though the FHFA senior examine
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assistance to homeowners and to use
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positive NPV, then the servicer is
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Siloed Practices: Harmonizing Busin
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Semiannual Report to the Congress
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overseen by FHFA. As conservator, F
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Page 144 and 145: Transparency and Certainty for Lend
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