The Federal Housing Finance Agency’s Office of Inspector General released a report recommending that the FHFA broaden the scope of its supervision of Fannie Mae and Freddie Mac to include review of their deficiency management approaches. The report found that neither Fannie Mae nor Freddie Mac pursue recoveries on deficiencies as their primary loss mitigation strategy, focusing instead on foreclosure alternatives to minimize losses (e.g., loan modifications). The report also noted that the strategies for recouping losses and approaches to pursuing deficiency judgments differ between Fannie Mae and Freddie Mac. For example, Fannie Mae articulated its intention to focus on strategic defaulters in a June 2010 press release and plans to lock-out strategic defaulters, while Freddie Mae has not yet established a policy for pursuing strategic defaulters. Ultimately, the OIG recommended that the FHFA:
- Routinely obtain deficiency-related information (e.g., size of Fannie Mae and Freddie Mac’s deficiencies, recovery rates);
- Incorporate deficiency management into the FHFA’s supervisory review process; and
- Issue written guidance to Fannie Mae and Freddie Mac on managing the process for deficiency collection.
The FHFA plans to develop a framework for deficiency-related information by April 2013; incorporate deficiency management into its supervisory review process by July 2013; and issue guidance to Fannie Mae and Freddie Mac on deficiency management by September 2013.