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144 Fannie Mae, “Comparison of Multifamily and Single-Family Financing Models,” Analysis of the Viability of Fannie Mae’s Multifamily Business Operating without a Government Guarantee - Response to FHFA Scorecard Directive, at 20 (December 17, 2012). Accessed: August 19, 2013, at www.fhfa.gov/webfiles/25160/ FNMMF2012ScorecardResponse.pdf. Federal Housing Finance Agency Office of Inspector General, “Enterprises’ Role in Primary and Secondary Residential Mortgage Markets,” “Sampling Methodology for the Asset Quality Examinations,” FHFA’s Oversight of the Asset Quality of Multifamily Housing Loans Financed by Fannie Mae and Freddie Mac, AUD-2013-004, at 6, 14 (February 21, 2013). Accessed: June 17, 2013, at www.fhfaoig.gov/Content/Files/AUD- 2013-004_2.pdf. 145 Freddie Mac, “The Underwriting and Credit Approval Process,” Freddie Mac Multifamily Securitization, at 15 (August 2013). Accessed: August 27, 2013, at www.freddiemac.com/ multifamily/pdf/mf_securitization_investorpresentation.pdf. 146 Fannie Mae, “Comparison of Multifamily and Single-Family Financing Models,” Analysis of the Viability of Fannie Mae’s Multifamily Business Operating without a Government Guarantee - Response to FHFA Scorecard Directive, at 20 (December 17, 2012). Accessed: August 19, 2013, at www.fhfa.gov/webfiles/25160/ FNMMF2012ScorecardResponse.pdf. 147 FHFA’s predecessor agency was the Office of Federal Housing Enterprise Oversight. Federal Housing Finance Agency Office of Inspector General, “2006 Report to Fannie Mae of Foreclosure Abuses in Florida,” “What FHFA-OIG Found,” FHFA’s Oversight of Fannie Mae’s Default-Related Legal Services, AUD-2011- 004, at 13, 2 (September 30, 2011). Accessed: June 17, 2013, at www.fhfaoig.gov/Content/Files/ AUD-2011-004.pdf. 148 Federal Housing Finance Agency Office of Inspector General, Overview of the Risks and Challenges the Enterprises Face in Managing Their Inventories of Foreclosed Properties, WPR-2012- 003 (June 14, 2012). Accessed: June 17, 2013, at www.fhfaoig.gov/Content/Files/WPR-2012-003. pdf. Federal Housing Finance Agency Office of Inspector General, FHFA’s Supervisory Risk Assessment for Single-Family Real Estate Owned, AUD-2012-005 (July 19, 2012). Accessed: June 17, 2013, at www.fhfaoig.gov/Content/Files/ AUD-2012-005_2.pdf. 149 Federal Housing Finance Agency Office of Inspector General, “Summary,” Overview of the Risks and Challenges the Enterprises Face in Managing Their Inventories of Foreclosed Properties, WPR-2012-003, at 2 (June 14, 2012). Accessed: June 17, 2013, at www.fhfaoig.gov/Content/ Files/WPR-2012-003.pdf. Federal Housing Finance Agency, “Fannie Mae Single-Family Book Profile - As of December 31, 2012,” “Freddie Mac Single-Family Book Profile - As of December 31, 2012,” Foreclosure Prevention Report, Fourth Quarter 2012: FHFA Federal Property Manager’s Report, at 42, 43. Accessed: June 18, 2013, at www.fhfa.gov/webfiles/25061/4q12fprfinal.pdf. Properties securing such severely delinquent mortgages are known as the shadow inventory because, although they do not belong to the enterprises yet, they are likely to become REO as the enterprises’ servicers foreclose on them. Further, counting only mortgages that have not been paid for over a year (over 504,000), the Semiannual Report to the Congress • April 1, 2013–September 30, 2013 131
enterprises still face tripling their 2012 inventory (nearly 155,000). 150 Federal Housing Finance Agency Office of Inspector General, “Enterprises’ REO Risks,” FHFA’s Supervisory Risk Assessment for Single- Family Real Estate Owned, AUD-2012-005, at 3, 5, 6 (July 19, 2012). Accessed: June 17, 2013, at www.fhfaoig.gov/Content/Files/AUD-2012- 005_2.pdf. 151 Id., “FHFA’s Supervision of Enterprises’ REO Risk,” at 9. 152 Fannie Mae, “Table 20: Single-Family Credit Loss Sensitivity,” Form 10-K for the Fiscal Year Ended December 31, 2012, at 88. Accessed: August 14, 2013, at www.sec.gov/Archives/ edgar/data/310522/000031052213000065/ fanniemae201210k.htm. Freddie Mac, “Table 62 – Single-Family Credit Loss Sensitivity,” Form 10-K for the Fiscal Year Ended December 31, 2012, at 164. Accessed: August 14, 2013, at www.sec.gov/Archives/ edgar/data/1026214/000119312513084154/ d477952d10k.htm. 153 Federal Housing Finance Agency Office of Inspector General, “Potential Limitations in the Standard Servicing Arrangement,” Evaluation of FHFA’s Oversight of Fannie Mae’s Transfer of Mortgage Servicing Rights from Bank of America to High Touch Servicers, EVL-2012-008, at 12 (September 18, 2012). Accessed: June 17, 2013, at www.fhfaoig.gov/Content/Files/EVL-2012- 008.pdf. 154 The net servicing fee for a loan may exceed 25 basis points (each = 1/100th of 1%), depending on a number of factors, such as MBS passthrough (the yield on the particular MBS of which the loan is a part) and Fannie Mae’s guarantee fee (which varies). Consider the case of a particular loan with a 6% interest rate, a guarantee fee of 20 basis points, and an MBS pass-through of 5.5%. To calculate the net servicing fee, Fannie Mae would take the yield of the loan (6%) and subtract: (1) the yield of the security (5.5%), (2) the guarantee fee (20 basis points), and (3) the minimum service fee (25 basis points). The remaining sum (5 basis points) would then be added to the 25 basis points minimum net service fee. Thus, in this case, the annual fee that a servicer would claim for this particular loan would be 30 basis points. Fannie Mae’s service fees are not negotiated but are calculated based on this fixed formula; a standard servicer’s ability to make a profit thus will vary with its ability to economize on servicing activities. See Federal Housing Finance Agency Office of Inspector General, “Mortgage Servicing,” Evaluation of FHFA’s Oversight of Fannie Mae’s Transfer of Mortgage Servicing Rights from Bank of America to High Touch Servicers, EVL-2012-008, at 9 (September 18, 2012). Accessed: June 17, 2013, at www.fhfaoig.gov/ Content/Files/EVL-2012-008.pdf. 155 Federal Housing Finance Agency Office of Inspector General, “Potential Limitations in the Standard Servicing Arrangement,” Evaluation of FHFA’s Oversight of Fannie Mae’s Transfer of Mortgage Servicing Rights from Bank of America to High Touch Servicers, EVL-2012-008, at 12 (September 18, 2012). Accessed: June 17, 2013, at www.fhfaoig.gov/Content/Files/EVL-2012- 008.pdf. 156 Id., “The High Touch Servicing Advantage,” “Potential Limitations in the Standard Servicing Arrangement,” at 12. 132 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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Interest Rate Swap: An interest rat
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References Federal Deposit Insuranc
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Department of the Treasury Financia
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