VOL. 126 | NO. 233 | Wednesday, November 30, 2011
Watchdog: Fannie, Freddie Abuses Went Unchecked
By DEREK KRAVITZ
WASHINGTON (AP) – A government watchdog said Fannie Mae and Freddie Mac improperly foreclosed on homeowners and cost the government billions of dollars by not holding major banks to strict underwriting requirements.
The report released Tuesday, Nov. 29, also said the Federal Housing Finance Agency gave “undue deference” to Fannie and Freddie officials and didn’t scrutinize more than $35 million in bonuses and compensation to Fannie and Freddie executives.
FHFA’s inspector general had previously released each of the findings on an individual basis. But the semi-annual report to Congress sketched a portrait of abuse at the two mortgage giants that the government failed to stop.
Fannie, Freddie and the FHFA didn’t respond to the report. But they have responded to similar allegations in previous reports.
Fannie and Freddie own or guarantee about half of U.S. mortgages, or nearly 31 million loans. The Bush administration seized control of the mortgage giants in September 2008.
Like banks, the mortgage giants relaxed lending standards during the housing boom and didn’t thoroughly check incomes and assets weren’t properly checked.
The inspector general report found that Fannie and Freddie did not force banks to repurchase mortgages when they failed to meet strict underwriting requirements. That decision cost the government billions of dollars.
When a senior examiner at FHFA raised “serious concerns” about Freddie’ process for reviewing Bank of America’s mortgages, senior Freddie managers disagreed, according to the report. The managers also said they feared losing business from Bank of America if the government became more aggressive in getting money back for bad mortgages, the report said.
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