The US federal agency overseeing Fannie Mae and Freddie Mac, the taxpayer-owned mortgage finance giants, failed to refer to criminal investigators and other authorities almost 100 complaints about possible foreclosure abuse and mortgage fraud at the companies over a recent two-year period, according to a report issued late Tuesday by the inspector general of the Federal Housing Finance Agency (FHFA).
While the report did not determine whether these and other complaints had merit, it said that the agency’s unresponsiveness to them was problematic.
“Failure to recognise and quickly provide law enforcement authorities with information about allegations of fraud and other potential criminal conduct presents a significant risk for the agency,” the report said.
The inspector general’s report is the third to assess the agency that acts as conservator for Fannie and Freddie, which have cost the taxpayer roughly $154 billion since they nearly collapsed in September 2008.
The assessment covers the agency’s responses to complaints raised by consumers as well as current and former employees of Fannie and Freddie. It covers a period from July 30, 2008, when the finance agency was created, to October 31, 2010, when the inspector general began its operations.
“Millions of Americans have been touched by the housing crisis,” Steve A Linick, the inspector general, said in a statement. “Increasingly, they have filed complaints about fraud, waste or abuse, including allegations of improper foreclosures and possible criminal activity. Those complaints deserve timely and responsible action by FHFA.”
Meg Burns, senior associate director in the office of Congressional Affairs and Communications, said that the agency had a limited mandate to deal with consumer issues but that it agreed with the recommendations and would follow them.
Linick and his staff found that during the period covered by the report, the agency assigned only two employees to process consumer complaints about Fannie and Freddie. Responding to the complaints was an additional duty for these employees, who also handled external correspondence for the agency, the report said. Because the agency’s workers did not separate complaints from other correspondence, they could not provide the inspector general with a complete file of complaints; this limited the study’s scope, it said.
Nevertheless, the inspector general examined 585 email complaints provided by the finance agency. Of those, 68 described possible foreclosure abuses and 27 involved suspicions of fraud.
Complaints in these two categories were supposed to be forwarded to the general counsel’s office at the Federal Housing Finance Agency. But, the report said, the two staff members overseeing the complaints “received no specific training regarding how to evaluate complaints or how to identify allegations requiring further action by the agency or referral to law enforcement authorities, such as the Department of Justice or the Federal Bureau of Investigation (FBI).”
Agency officials had no records showing that any complaints had been submitted to the general counsel’s office, reviewed or acted upon. The general counsel’s office did confirm that it had referred no complaints to law enforcement authorities during the audit period, the report noted.
“It is stunning that the conservator of Fannie Mae and Freddie Mac, which have received $150 billion in a taxpayer-funded bailout, had just two people receiving and processing customer complaints,” Representative Spencer Bachus, the Alabama Republican who is chairman of the House’s financial services committee, said in a statement. “Who knows how many reports of waste, fraud and abuse have gone unheeded and unaddressed?”
The inspector general concluded that the housing finance agency’s failure to address or effectively track complaints “was largely the result of its inability to decide whether to handle consumer complaints, and how to address those complaints it decided to handle. From the onset, FHFA treated its complaints processing function more as a public or external relations task, as opposed to a core regulatory or conservator function.”
This approach left the agency in the dark about potential trends or risks in Fannie’s and Freddie’s operations, the report added. Being able to spot such risks is especially crucial for a regulator that is as thinly staffed as the agency, the inspector general said. “Such a capacity could have served as an ‘early warning system’”, the report noted.
Most of the emailed complaints reviewed by the inspector general — 470 — were sent by the finance agency to Fannie and Freddie for disposition, the report said. But the agency conducted no follow-up about whether the companies had responded.
©2011 The New York
Times News Service
