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Sixth Semiannual Report to the Congress - Federal Housing ...
Sixth Semiannual Report to the Congress - Federal Housing ...
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Figure 5. Agreements Between Fannie Mae and<br />
Bank of America ($ billions)<br />
Agreement<br />
Representation and Warranty<br />
Settlement<br />
Cash “Make-Whole”<br />
Payment<br />
Settlement Cash<br />
Proceeds<br />
$3.6<br />
Repurchases 6.7<br />
Total Representation and<br />
Warranty Settlement<br />
Compensatory Fees for<br />
Failure to Meet Delinquency<br />
Timelines<br />
Transfer of Mortgage<br />
Servicing Rights<br />
10.3<br />
1.3<br />
No funds to or from<br />
Fannie Mae<br />
Total $11.6<br />
servicing rights on about 1.1 million mortgages from<br />
Bank of America to other servicers.<br />
When approving the settlement, FHFA employed a<br />
new policy governing the review of repurchase claim<br />
settlements that it developed in part as a response<br />
to an earlier OIG evaluation and recommendation. 2<br />
Because FHFA’s policy applied to one, but not all,<br />
portions of the settlement, the 2013 settlement<br />
enabled OIG to evaluate FHFA’s oversight under its<br />
settlement policy in the context of its oversight of<br />
matters that fell outside of that policy.<br />
OIG found that FHFA adhered to its new policy<br />
when reviewing the settlement of repurchase claims<br />
between Fannie Mae and Bank of America. This<br />
policy did not apply, however, to the resolution of<br />
claims related to servicing penalties or the transfer<br />
of mortgage servicing rights (MSR). Consequently,<br />
FHFA’s consideration of these aspects of the<br />
settlement did not benefit from an established review<br />
process.<br />
OIG recommended that FHFA establish a formal<br />
review process for claims related to servicing<br />
deficiencies and significant MSR transfers. FHFA<br />
agreed with this recommendation and committed to<br />
establish guidelines by January 31, 2014.<br />
Fannie Mae’s Compliance with FHFA Email<br />
Retention Requirements (EVL-2013-011,<br />
August 16, 2013)<br />
In November 2011, while conducting an<br />
investigation, OIG special agents learned that<br />
although Fannie Mae permanently retained the<br />
email of most employees in sensitive positions, it<br />
automatically deleted the unsaved email of other<br />
employees after 60 days. In October 2012, FHFA<br />
directed Fannie Mae to immediately begin saving all<br />
employee email records and establish and implement<br />
a corporate five-year email retention policy.<br />
OIG reviewed Fannie Mae’s compliance with the<br />
email retention directive and confirmed that the<br />
enterprise is now in compliance.<br />
OIG will continue to monitor FHFA’s oversight of<br />
the enterprises’ email retention practices and records<br />
management policies to ensure that they fulfill their<br />
intended purposes.<br />
FHFA’s Oversight of the Federal Home Loan<br />
Banks’ Compliance with Regulatory Limits on<br />
Extensions of Unsecured Credit (EVL-2013-008,<br />
August 6, 2013)<br />
In addition to making secured loans, known as<br />
advances, to member financial institutions, the<br />
FHLBanks extend short-term, unsecured credit to<br />
domestic and foreign-owned financial institutions.<br />
In June 2012, we reported that some FHLBanks<br />
followed potentially risky unsecured credit<br />
management practices, including undertaking large<br />
exposures to counterparties located in the financially<br />
troubled Eurozone. 3 Furthermore, we found that<br />
some FHLBanks violated FHFA’s regulatory limits<br />
on unsecured credit extensions. We recommended<br />
that FHFA: (1) assess the extent of such violations<br />
in its 2012 horizontal review of unsecured credit risk<br />
Semiannual Report to the Congress • April 1, 2013–September 30, 2013 13