FEDERAL

More documents

Recommendations

Info

in a number of criminal and civil investigations; and (3) reviewing and commenting on FHFA rules. Audits and Evaluations During this semiannual period, OIG released 14 audit and evaluation reports, which are summarized below. Audits FHFA Can Strengthen Controls over Its Office of Quality Assurance (AUD-2013-013, September 30, 2013) FHFA’s Office of Quality Assurance (OQA) is a crucial internal control for the agency’s examinations of the GSEs. Internal controls, when effective, give FHFA management greater assurance that the agency can achieve its mission, operate effectively and efficiently, report reliably, and comply with applicable laws and regulations. Per its charter, OQA conducts internal reviews of FHFA’s divisions that carry out the agency’s examination and examination support functions. The agency uses OQA reviews to enhance the effectiveness of FHFA’s supervision of the housing GSEs, helping to ensure that they operate in a safe and sound manner and provide liquidity for the housing market. OIG conducted this performance audit to assess controls related to the (1) effectiveness of OQA’s review of FHFA’s examination and examination support functions and (2) extent of OQA’s coverage of other FHFA functions that may pose significant risks. OIG found that OQA generally conducted effective, risked-based reviews of FHFA’s examination and examination support functions. Further, OIG validated that in four of OQA’s reports the conclusions, findings, and recommendations were supported by adequate evidence. However, most of OQA’s 22 recommendations have not been fully or promptly resolved (see Figure 2, below), primarily because OQA did not (1) require FHFA to respond formally in writing and commit to specific timelines for completing corrective actions and (2) follow up on corrective actions. As of March 31, 2013: • 8 recommendations remained open, 6 of them for 520 or more days; and • 14 recommendations were reported as “closed,” but OQA had not validated 7 of them to ensure that the proposed corrective actions had been implemented or adequately addressed the recommendations. Figure 2. Status of OQA Recommendations Issuance Date 2011 2012 Total Open 6 2 8 Closed 5 9 14 Total 11 11 22 Percent Open 55% 18% 36% Addressing OQA recommendations in a complete and timely manner can help FHFA ensure the quality of its examinations and maximize the value of its investment in OQA. In addition, OQA’s risk-based reviews do not cover all of FHFA’s offices. The present focus of OQA on examination and related support functions excludes key agency operations, such as the Office Semiannual Report to the Congress • April 1, 2013–September 30, 2013 7
of Conservatorship Operations, which approves management decisions affecting the enterprises. OIG recommended that FHFA should strengthen controls over OQA reporting and follow-up; evaluate the roles and responsibilities of OQA across the agency and revise OQA’s charter accordingly; assess the risks across all agency operations for the purposes of planning OQA review coverage; and direct performance reviews of those areas that pose the most significant risks to FHFA. FHFA provided comments agreeing with the recommendations in the report. Additional FHFA Oversight Can Improve the Real Estate Owned Pilot Program (AUD-2013-012, September 27, 2013) Typically, when borrowers default on enterpriseowned or -guaranteed mortgages and efforts to cure the defaults are unsuccessful, the mortgages are foreclosed on. Through foreclosure, properties that secure the defaulted mortgages can be acquired by the enterprises as real estate owned (REO) properties. The enterprises’ REO inventory levels increased dramatically in the years following the financial crisis. In accordance with its broad conservatorship objective to minimize costs and maximize the net present value of REO, FHFA initiated a pilot program in 2012 to assist with REO disposition efforts. The REO Pilot Program was the first, and to date only, transaction to be conducted under a broader FHFA initiative to develop and implement an improved REO disposition program. For the pilot transaction, about 2,500 single-family Fannie Mae REO properties, many with tenants, were consolidated into pools in eight geographic areas and offered to prequalified investors for sale. OIG audited FHFA’s oversight of Fannie Mae’s policies, procedures, and practices with respect to the selection and administration of investors participating in the REO Pilot Program. OIG found that FHFA established a sound process for reviewing, scoring, and recommending investors to qualify as bidders under the pilot program. However, Fannie Mae’s bidder qualification contractor did not fully comply with important provisions of the established process. Specifically, the contractor did not properly score the risk attributes for 12 of 47 potential investors, 6 of whom were determined to be eligible to bid even though they did not meet prescribed bidder qualification scoring criteria. Figure 3 (see page 9) provides a summary of the results of OIG’s analysis of the scoring of investor applications. Moreover, certain areas of the application and scoring criteria require clarification if used for similar programs in the future. Additionally, Fannie Mae did not always follow its contractor’s scores and recommendations. For example, the enterprise, with FHFA’s concurrence, permitted two potential investors to bid on mortgage pools even though both were scored by the contractor as high risk and not recommended to bid. Further, FHFA did not independently verify the work performed by Fannie Mae’s bidder qualification contractor, and thus, the instances of noncompliance were not discovered by the agency. In addition, FHFA had not clarified several goals that are applicable to the REO Pilot Program. Specifically, FHFA had not clarified how the goals and objectives of the pilot program will be achieved or how the agency intends to monitor and assess the performance of the pilot or any other future initiatives under the overall REO disposition program. OIG recommended that FHFA: (1) establish verification controls to ensure enterprise contractors are performing in accordance with agreed-upon criteria and that any proposed waivers to the criteria are documented and submitted for FHFA review and approval; (2) clarify guidance regarding bidder submission of financial statements and explanation of adverse financial events as part of the bidder 8 Federal Housing Finance Agency Office of Inspector General
Page 2 and 3: Federal Housing Finance Agency Offi
Page 4 and 5: Section 3: Lessons for Housing Fina
Page 6 and 7: OIG’s Accomplishments from 2010 t
Page 8 and 9: A Message from the Acting Inspector
Page 10 and 11: insures mortgages against credit lo
Page 12 and 13: Semiannual Report to the Congress
Page 16 and 17: Figure 3. Scoring of Investor Quali
Page 18 and 19: and provide for financial consequen
Page 20 and 21: Figure 5. Agreements Between Fannie
Page 22 and 23: 2010 to 2012, but the attrition rat
Page 24 and 25: Figure 8. Estimated Enterprise Aggr
Page 26 and 27: operations that pose the greatest r
Page 28 and 29: poor financial condition, Appalachi
Page 30 and 31: fraud and wire fraud involving a fi
Page 32 and 33: This was a joint investigation with
Page 34 and 35: y falsified, forged, and altered do
Page 36 and 37: Short Sale Schemes A short sale occ
Page 38 and 39: This was a joint investigation with
Page 40 and 41: at Appalachian concealed past due l
Page 42 and 43: indemnification payments that OIG p
Page 44 and 45: the SEC, and others. In July 2013,
Page 46 and 47: Figure 10. Overview of the Enterpri
Page 48 and 49: Figure 12. Enterprises’ Annual Ne
Page 50 and 51: Figure 14. Home Price Index 2011 Th
Page 52 and 53: educe the principal balance of Trea
Page 54 and 55: Figure 17. FHLBanks’ Net Income f
Page 56 and 57: multifamily housing lending busines
Page 58 and 59: The bill would replace the enterpri
Page 60 and 61: mortgage credit. For its part, the
Page 62 and 63: Figure 20. Reform Models and Reform
Page 64 and 65:
Multifamily We have also found indi
Page 66 and 67:
Based on recent history, a reformed
Page 68 and 69:
Figure 26. The Mortgage Servicing P
Page 70 and 71:
Even though the FHFA senior examine
Page 72 and 73:
assistance to homeowners and to use
Page 74 and 75:
positive NPV, then the servicer is
Page 76 and 77:
Siloed Practices: Harmonizing Busin
Page 78 and 79:
Semiannual Report to the Congress
Page 80 and 81:
overseen by FHFA. As conservator, F
Page 82 and 83:
Interest Rate Swap: An interest rat
Page 84 and 85:
References Federal Deposit Insuranc
Page 86 and 87:
Department of the Treasury Financia
Page 88 and 89:
Acronyms and Abbreviations Agency A
Page 90 and 91:
Page 92 and 93:
Figure 29. Summary of OIG Recommend
Page 94 and 95:
No. Recommendation Report Status AU
Page 96 and 97:
Page 98 and 99:
Page 100 and 101:
Page 102 and 103:
Page 104 and 105:
No. Recommendation Report Status EV
Page 106 and 107:
Page 108 and 109:
Page 110 and 111:
Page 112 and 113:
Page 114 and 115:
Audit and Evaluation Reports with R
Page 116 and 117:
Appendix D: OIG Reports See www.fhf
Page 118 and 119:
Appendix F: Description of OIG Offi
Page 120 and 121:
Strategic Goal 2—Operating with I
Page 122 and 123:
Figure 17. Federal Home Loan Banks
Page 124 and 125:
Page 126 and 127:
15 Federal Housing Finance Agency,
Page 128 and 129:
33 Fannie Mae, “Multifamily Busin
Page 130 and 131:
Federal Home Loan Banks Office of F
Page 132 and 133:
to FHFA Scorecard Directive, at 48,
Page 134 and 135:
it is preferable to limit our discu
Page 136 and 137:
Position in the Housing Finance Sys
Page 138 and 139:
144 Fannie Mae, “Comparison of Mu
Page 140 and 141:
157 Id., “Mortgage Servicing,”
Page 142 and 143:
184 Federal Housing Finance Agency,
Page 144 and 145:
Transparency and Certainty for Lend
show all

FEDERAL

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?