A new report by the Federal Housing Finance Agency Office of the Inspector General (FHFA OIG) is taking the agency and Freddie Mac to task over the handling of servicing-related complaints.
‘Serious complaints, known as escalated cases, may allege servicing fraud or regulatory violations,’ says the report. ‘Freddie Mac and its eight largest servicers together received over 34,000 escalated cases between October 2011 and November 2012.’
The OIG found that the FHFA, Freddie Mac and the eight servicing companies ‘have not adequately fulfilled their respective responsibilities to address and resolve escalated cases. First, evidence suggests that most of Freddie Mac's servicers are not complying with reporting requirements for escalated cases. As of December 2012, 1,179 or 98 percent of Freddie Mac's servicers had not reported on any escalated cases even though they managed 6.6 million mortgages for Freddie Mac. Of Freddie Mac's eight largest servicers – which serviced nearly 70 percent of its loans – four did not report any information about escalated cases despite handling more than 20,000 such cases during the 14-month period between October 2011 and November 2012.
‘Second, Freddie Mac's oversight of servicer compliance has been inadequate,’ the report continues. ‘It has not implemented procedures for testing servicer compliance. As a result, it had findings related to escalated cases in only one of 38 reviews of its largest national and regional servicers that it conducted in 2012. Freddie Mac has also neglected to establish penalties (such as fines) for servicers that do not report escalated cases.’
Neither the FHFA nor Freddie Mac publicly commented on the report.
