WASHINGTON, March 21 Government-controlled
mortgage financer Freddie Mac has failed to promptly
resolve serious consumer complaints that could involve possible
fraud or improper foreclosures, a federal watchdog said on
Freddie Mac and its larger sibling Fannie Mae pay
mortgage servicers to collect loan payments and interact with
consumers. Those servicers deal with a range of issues,
including late fees and providing loan assistance and
foreclosure alternatives to homeowners.
The Federal Housing Finance Agency Office of the Inspector
General made an in depth examination of how the FHFA might have
mishandled consumer complaints filed against the
government-sponsored enterprises, including issues related to
possible foreclosure actions.
As part of that audit, the FHFA's inspector general also
took a closer look at Freddie Mac, which owns or guarantees more
than 10.6 million residential mortgages worth about $1.6
More than 34,000 escalated cases - which could involve
servicing fraud or regulatory violations - were filed by
homeowners with Freddie Mac and its eight largest mortgage
servicers during a 14-month period between October 2011 and
November 2012. But Freddie and its regulator have not resolved
many of the cases, the audit found.
Although current FHFA guidelines require servicers to report
the escalated cases they receive and resolve them within 30
days, more than 20 percent were not taken care of within that
time frame, the audit found.
"Freddie Mac's oversight of servicer compliance has been
inadequate," the audit report said. "Strengthened oversight -
through actions aimed specifically at improving servicer
compliance with escalated case requirements - can benefit
homeowners, Freddie Mac, and taxpayers."
The watchdog recommended a number of ways to enhance the
oversight of mortgage servicers and improve the oversight of
Freddie Mac, including levying fines for servicers if they are
late in responding to escalated cases.
In a letter to the watchdog responding to the audit, the
FHFA said it agrees with "the intent of these recommendations,"
yet many of them would be limited due to new mortgage servicing
rules announced in January by the Consumer Financial Protection
The regulator said it will work with both Fannie Mae and
Freddie Mac on new rules and try to ensure more timely responses
Among Freddie Mac's eight largest servicers, which handled
nearly 70 percent of the company's 10.6 million mortgages, four
did not report any escalated cases, despite handling thousands
such cases during the 14-month period audited by the watchdog.
Bank of America Corp, CitiMortgage, Provident
and Wells Fargo & Co did not comply, the watchdog said.
Those servicers "did not report any escalated cases to Freddie
Mac despite handling more than 20,000 such cases," the audit
However, when contacted by the inspector general in
connection with the audit, the four servicers said they would
begin reporting to Freddie Mac.
Data on all of Freddie Mac's servicers revealed that about
98 percent never reported any escalated cases as of December
2012, the report stated.
Many of the servicers also manage loans for Fannie Mae.
Rep. Elijah Cummings, the top Democrat on the House
Oversight Committee, said in a statement that the audit's
findings represents "a sorry string of failures by FHFA
leadership to protect American homeowners."
Cummings has been a leading lawmaker applying pressure on