New IG Report Exposes FHFA’s Failure to Properly Ensure Banks are Complying with Consumer Protection Laws
Washington, D.C. (March 26, 2013) -- Today, Congressman Elijah E. Cummings (D-MD), Ranking Member of the House Committee on Oversight and Government Reform, released a new report issued by the Inspector General of the Federal Housing Finance Agency (FHFA) finding that FHFA failed to properly monitor the business practices of banks that sell mortgages to or service mortgages for Fannie Mae and Freddie Mac to ensure that they follow all federal and state consumer protection laws when originating or servicing such loans.
“Another week has brought yet another sorry report from the FHFA Inspector General finding that FHFA and the government-sponsored enterprises (GSEs) have failed to take seriously their obligations to protect consumers,” said Cummings. “Today’s report only confirms what I believe is the urgent need of the Oversight Committee to hold a hearing with FHFA and its Inspector General to examine FHFA’s repeated refusal to fully implement its statutory obligations to ensure that American homeowners are never again subjected to the abusive business practices of banks.”
Federal law requires that FHFA independently ensure that taxpayer dollars are protected from the risky business practices of banks. The Inspector General concluded that FHFA has utterly failed to “actively” supervise Freddie Mac and Fannie Mae to ensure that the banks from which they buy loans or which they engage to service loans are in compliance with all applicable consumer protection requirements. Instead, Fannie and Freddie have relied on “self-certification of contractual compliance” as well as other federal regulators’ supervision and enforcement activities.
This report comes on the heels of a report issued by the FHFA Inspector General last week warning that mortgage companies that service loans backed by Freddie Mac “have largely failed to implement” requirements to resolve “escalated cases” of serious homeowner complaints alleging abuses such as improper foreclosures and fraudulent servicing practices. That report also found that neither Freddie Mac nor FHFA conducted adequate oversight of the servicers’ handling of escalated cases and that no penalties had been imposed on servicers for their failure to resolve such cases in a manner compliant with current guidelines.
Based on that report, Ranking Member Cummings sent a letter to Chairman Darrell Issa requesting that the Committee hold a hearing with Edward DeMarco, the Acting FHFA Director, and Steve A. Linick, the Inspector General of the FHFA.
Cummings has called for new leadership at FHFA and encouraged President Obama to nominate a permanent, Senate-confirmed candidate to replace DeMarco.