Federal Housing Finance Agency Under Inspector's Fire

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Given that the conservator of Fannie Mae and Freddie Mac, the Federal Housing Finance Agency (FHFA) has been wielding incredible power of late in deciding how much the two mortgage giants can and cannot charge in guarantee fees and whom they can and cannot refinance, it was particularly disturbing to learn the that same FHFA has been deemed, dare I say it, incompetent, at least in one of its oversight capacities.

The FHFA's Office of Inspector General has released a scathing report that points to understaffing and inefficiency at the mortgage giants' regulator.

"FHFA-OIG has identified shortfalls in the Agency's examination coverage, particularly in the areas of Real Estate Owned (REO) and default-related legal services," the report begins. Translation: "Robo-signing" paperwork issues.

"FHFA has too few examiners overall to ensure the efficiency and effectiveness of its examination program," the report continues. Apparently just about a third of the FHFA's 120 non-executive examiners are accredited federal financial examiners, and there is nothing in the works there to "improve this condition."

But wait, there's more: "FHFA, to its credit, has sought to address these challenges. Although this is a positive response, FHFA has expressed concern that its current hiring initiative will neither enable it to overcome its examination capacity shortfalls nor ensure the effectiveness of its 2011 reorganization."

So the FHFA is having trouble getting new examiners, because, logically why would anyone want to go work for an agency that regulates two entities that are supposed to be eliminated over the next five years? Still, it's not exactly comforting to hear that there's no one, or at least too few people, minding the store...the store which finances more than half of the nation's home mortgages.

Fannie Mae had no comment. The FHFA responds in an appendix to the report.

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