FEDERAL
Sixth Semiannual Report to the Congress - Federal Housing ...
Sixth Semiannual Report to the Congress - Federal Housing ...
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Executive Summary<br />
Overview<br />
This Semiannual Report discusses OIG operations<br />
and FHFA developments from April 1, 2013, to<br />
September 30, 2013. 1<br />
The changing conditions noted in our last<br />
Semiannual Report have continued during this<br />
period. The enterprises’ dominance of the secondary<br />
market for residential mortgages persists in an<br />
environment of escalating home prices, improved<br />
credit quality, and increasing guarantee* fees.<br />
Thus, their profitability has steadily improved since<br />
the end of 2011. Further, in light of the August<br />
2012 amendments to the Senior Preferred Stock<br />
Purchase Agreements (PSPAs), the enterprises’<br />
profits are beginning to offset losses that began in<br />
2007.<br />
As the enterprises’ profits have increased, their need<br />
for government financial assistance has decreased.<br />
Accordingly, for the third semiannual reporting<br />
period, the Department of the Treasury (Treasury)<br />
was not required to increase its investment in<br />
the enterprises, which remains at approximately<br />
$187.5 billion.<br />
Meanwhile, during the first six months of 2013,<br />
advance demand among the FHLBanks continued<br />
to show signs of stabilizing, and the FHLBanks<br />
experienced a marginal increase in profitability.<br />
*Terms and phrases in bold are defined in<br />
Appendix A, Glossary and Acronyms. If you<br />
are reading an electronic version of this<br />
Semiannual Report, then simply move your<br />
cursor to the term or phrase and click for<br />
the definition.<br />
Exploring these and other issues, this report is<br />
organized as follows. Section 1, OIG Description,<br />
Accomplishments, and Strategy, highlights several<br />
OIG audits, evaluations, and investigations relating<br />
to the programs and operations of FHFA. Section 2,<br />
FHFA and GSE Operations, provides a closer look<br />
at FHFA and government-sponsored enterprise<br />
(GSE) developments during this reporting period.<br />
And, finally, Section 3, Lessons for Housing Finance<br />
Reform: Five Years After the Federal Government’s<br />
Takeover of Fannie Mae and Freddie Mac, discusses<br />
three important factors that bear on housing finance<br />
reform—soundness, oversight, and balance—all of<br />
which are important for a stable and liquid mortgage<br />
market.<br />
Section 1: OIG Description,<br />
Accomplishments, and Strategy<br />
This section provides a brief overview of OIG’s<br />
organization and describes its oversight activities,<br />
including audits, evaluations, and investigations. It<br />
also discusses OIG’s priorities and goals.<br />
For example, in this section we discuss:<br />
• FHFA’s Initiative to Reduce the Enterprises’<br />
Dominant Position in the Housing Finance System<br />
by Raising Gradually Their Guarantee Fees (EVL-<br />
2013-005, July 16, 2013), in which we analyzed<br />
the agency’s initiative to increase the enterprises’<br />
guarantee fees to encourage greater private-sector<br />
investment in mortgage credit risk and reduce<br />
the enterprises’ dominant position in housing<br />
finance. We also assessed FHFA’s communication<br />
and interaction with the Federal Housing<br />
Administration (FHA), a government agency that<br />
2 Federal Housing Finance Agency Office of Inspector General