Friday, June 24, 2011

Federal Home Financing Agency Finds Neglect at Fannie and Freddie

Fannie Mae and Freddie Mac have ignored fraud and been complacent about enforcement. According to a federal audit by the Federal Home Financing Agency (FHFA) and its Office of the Inspector General (OIG), the government-controlled agencies have not been particularly accountable when it comes to dealing with distressed borrowers. In fact, the audit found that “the federal agency has let complaints alleging fraud, abuse and waste…slip through the cracks with no oversight of their resolution.” In fact, FHFA even failed to refer “potentially criminal allegations” to law enforcement authorities. The FHFA has promised to remedy these issues, nearly three-quarters of which are directly related to Fannie Mae and Freddie Mac. Apparently, all of the complaints were sent to two former public relations staff members and there was no oversight of the resolution process. In fact, supervision and processing were so badly handled that the OIG said that it could not even gain a “true grasp on the scope or number of complaints received or resolved.”

Steve Linick, FHFA’s inspector general, says that the situation must be remedied immediately. “Millions of Americans have been touched by the housing crisis,” he said, adding that their “complaints deserve timely and responsible action by the FHFA”. Meg Burns, senior associate director in the Office of Congressional Affairs and Communications did not disagree with Linick but did point out that FHFA has a “limited mandate to deal with consumer issues.” However, FHFA has agreed with OIG recommendations and will follow them, she said. So, more good news on the troublesome twins, Fannie and Freddie! Should any of this come as a surprise to us?? It is this type of behavior that leads me to conclude that the government is part of the problem and not likely to be part of the solution. More bureaucracy is rarely the answer and at this point, no one even knows what agency is responsible for what situations!!

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