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2010 to 2012, but the attrition rate appears to be stabilizing, as its 2012 rate was lower than its 2011 rate. We concluded that human capital risks associated with voluntary attrition rates within the enterprises’ capital market businesses had been adequately managed and that no additional study on this topic was needed. However, voluntary attrition rates are not static, and an improving economy puts additional pressure on the enterprises’ attrition rates as attractive opportunities become available to their employees. Therefore, we will continue to monitor FHFA’s oversight of the enterprises’ human capital resources and planning associated with human capital risk, and we will initiate additional work on this topic as warranted. Home Affordable Refinance Program: A Mid-Program Assessment (EVL-2013-006, August 1, 2013) FHFA, in coordination with Treasury, announced HARP in March 2009. HARP is a streamlined refinance program for loans owned or guaranteed by Fannie Mae or Freddie Mac. It is designed to assist borrowers who are current on their loans but have not been able to refinance because they have little or no equity in their homes. We conducted this program evaluation to assess FHFA’s administration and oversight of HARP. When HARP was announced, Treasury estimated that 4 to 5 million borrowers would have the opportunity to refinance under the program. As of September 2011, however, fewer than 1 million of those borrowers had refinanced. Based on consultations with lenders and feedback from borrowers, FHFA directed the enterprises to modify the program; this resulted in HARP 2.0, which is scheduled to expire on December 31, 2015. As a result of the initial HARP 2.0 program modifications and subsequent changes made throughout 2012 and 2013, HARP refinance volume has substantially increased (see Figure 7, page 16). As of March 2013, 2.4 million HARP refinances had been completed. It is difficult, however, to project how many HARP-eligible loans will ultimately be refinanced. Several unknown variables, including interest rates, lender participation, and borrowers’ willingness to refinance, make any estimate uncertain. Additionally, challenges to the program’s success remain. These challenges include educating borrowers and encouraging their participation in the program. FHFA is planning to address the challenges by implementing a nationwide public education campaign. FHFA’s Initiative to Reduce the Enterprises’ Dominant Position in the Housing Finance System by Raising Gradually Their Guarantee Fees (EVL-2013-005, July 16, 2013) FHFA has argued that federal financial support for the enterprises over the years has permitted them to set their guarantee fees—charged to protect investors’ mortgage-backed securities (MBS) against potential credit losses—at artificially low levels. At such levels, the fees priced competitors out of the conforming loan market and increased the enterprises’ risks. The agency has directed the enterprises to increase guarantee fees to encourage greater private-sector investment in mortgage credit risk, reduce the enterprises’ dominant position in housing finance, and limit potential taxpayer losses. We conducted this evaluation to: (1) analyze FHFA’s initiative and (2) assess FHFA’s communication and interaction with FHA, a government agency that insures mortgages against credit losses, which recently announced a cessation of its mortgage premium increases. Semiannual Report to the Congress • April 1, 2013–September 30, 2013 15
Figure 7. Total HARP Refinances for April 2009 Through March 2013 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 June 2009 September 2009 December 2009 March 2010 June 2010 September 2010 December 2010 March 2011 June 2011 September 2011 December 2011 March 2012 June 2012 September 2012 December 2012 March 2013 We found that although the enterprises’ average combined guarantee fees have nearly doubled since 2011 (see Figure 8, page 17), FHFA has not determined how high the enterprises must increase guarantee fees to achieve FHFA’s objectives. The agency also has not yet defined or developed measures for increasing private-sector investment in mortgage credit risk. In addition, the agency must confront related challenges: too-high increases could dampen consumer demand for mortgages and certain federal initiatives— designed to combat abusive lending—could limit privatesector investment. Although the enterprises’ average combined guarantee fees have nearly doubled since 2011, FHFA has not determined how high guarantee fees must increase to achieve its objectives. Further, we found that FHFA may realize additional benefits by seeking to establish a more formal working relationship with FHA and jointly assessing the key issues that may affect their pricing initiatives. For example, coordination may help to avoid a pricing disparity between guarantee fees and insurance premiums that could shift a portion of the enterprises’ mortgage business and associated risks to FHA’s market without an overall increase in privatesector investment in mortgage credit risk. Figure 7. Total HARP Refinances for April 2009 Through March 2013 We recommended that FHFA establish definitions and performance measures for its initiative to raise enterprise 16 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 14 and 15: in a number of criminal and civil i
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 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
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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
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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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Acronyms and Abbreviations Agency A
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Figure 29. Summary of OIG Recommend
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No. Recommendation Report Status AU
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No. Recommendation Report Status EV
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Audit and Evaluation Reports with R
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Appendix D: OIG Reports See www.fhf
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Appendix F: Description of OIG Offi
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Strategic Goal 2—Operating with I
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Figure 17. Federal Home Loan Banks
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15 Federal Housing Finance Agency,
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33 Fannie Mae, “Multifamily Busin
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Federal Home Loan Banks Office of F
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to FHFA Scorecard Directive, at 48,
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it is preferable to limit our discu
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Position in the Housing Finance Sys
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144 Fannie Mae, “Comparison of Mu
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157 Id., “Mortgage Servicing,”
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184 Federal Housing Finance Agency,
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Transparency and Certainty for Lend
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