On September 18, the Inspector General (IG) for the FHFA published a report on the FHFA’s oversight of management of high-risk sellers and servicers by Fannie Mae and Freddie Mac (the Enterprises). The high-risk seller/servicer report presents a review of the Enterprises’ high risk counterparties and noted that more than 300 are on the Enterprises’ watch lists while more than forty have been blocked from doing business with the Enterprises. To better manage counterparty risk, the IG recommends that the FHFA promulgate standards for the Enterprises to develop contingency plans for handling a large seller/servicer’s failure, and that the FHFA finalize its proposed guidance for FHFA examiners to use in assessing the Enterprises’ contingency plans.
On the same day, the FHFA IG published a report regarding Fannie Mae’s purchase and transfer of certain mortgage servicing rights on approximately 384,000 loans for roughly $512 million. The IG determined that the amount paid was consistent with other such purchases made as part of a Fannie Mae program through which Fannie Mae transferred mortgage servicing rights from a regular servicer to a specialty servicer. While it determined that Fannie Mae did not overpay for the servicing rights in context, the IG recommended that the FHFA (i) consider requiring the Enterprises to seek approval for high costs initiatives, (ii) ensure additional scrutiny of pricing of future significant servicing transactions, (iii) reevaluate the Fannie Mae transfer program, and (iv) follow through with Fannie Mae’s implementation of prior FHFA directions regarding the purchase and transfer of mortgage servicing rights.