(Bloomberg) 3/7/2012 -- Freddie Mac and its regulator, the Federal Housing Finance Agency, need to do a better job supervising financial institutions servicing the company’s loans, according to the FHFA Office of Inspector General.
FHFA hasn’t implemented regulations governing servicer oversight or paid enough attention to abuses uncovered by other federal regulators, Deputy Inspector General Russell A. Rau wrote today in a report. Five servicers, including Wells Fargo & Co. (WFC) and JPMorgan Chase & Co. (JPM), last month settled a lawsuit with state and federal authorities after investigations revealed the banks didn’t have the proper documents to seize homes.
FHFA, which learned about the practices of Freddie Mac’s mortgage servicers in 2008, didn’t begin paying attention to them until August 2010, according to the report.
“Documentation provided by Freddie Mac strongly suggests that weak servicer oversight and risk management played a significant role in the unsatisfactory performance,” Rau wrote in the report. “In light of these control deficiencies, FHFA is not assured that the risk associated with Freddie Mac’s servicing operations is being sufficiently managed.”
FHFA is taking steps to improve its monitoring of servicing at Freddie Mac and Fannie Mae, Jon Greenlee, FHFA’s deputy director of enterprise regulation, said in a written response to the the report.
“FHFA agrees that mortgage servicing is a critical area and we have made mortgage servicing a top priority of the agency,” Greenlee wrote.
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