WASHINGTON (3/28/13)--The Federal Housing Finance Administration (FHFA) does not thoroughly oversee how Fannie Mae and Freddie Mac monitor their sellers' and servicers' compliance with consumer laws and regulations, the FHFA Office of the Inspector General (OIG) said in a report.
Specifically, the FHFA does not examine how those government sponsored entities (GSEs) monitor seller and servicer compliance with consumer protection laws, and Fannie and Freddie do not ensure that these counterparties' business practices follow all federal and state laws and regulations designed to protect consumers from unlawful activities such as discrimination, the OIG report noted. The FHFA instead relies on federal regulatory agencies that are responsible for enforcing laws that protect mortgage borrowers. Fannie and Freddie expect institutions they are involved with to comply with all laws, but rely mainly on self-certification by these institutions to determine their compliance, the report said.
Failing to adequately oversee consumer law compliance can subject Fannie and Freddie to increased economic risk, the OIG report warned.
The OIG recommended that the FHFA develop a risk-based plan to monitor the GSEs oversight of their counterparties' compliance with contractual representations and warranties, including those related to federal consumer protection laws. The FHFA said it is committed to the fair treatment of consumers, and agreed to develop a plan to address the issue cited in the report.
Credit Union National Association Deputy General Counsel Mary Dunn said CUNA will be weighing in with the FHFA on this issue. Noting that credit unions thoroughly comply with legal requirements, including consumer protection laws, Dunn said CUNA wants to "ensure that additional regulatory burdens are not imposed on credit unions in order to demonstrate compliance, since they are already subject to more than sufficient requirements in that regard.
"We will urge FHFA to coordinate with other regulators to avoid making the mortgage lending process even more cumbersome for consumers and creditors alike," she said.
For the FHFA OIG release, use the resource link.