Freddie Mac has failed to promptly and adequately resolve consumer complaints involving possible fraud and improper foreclosure issues, according to an audit report released March 21 by the Federal Housing Finance Agency Office of the Inspector General.
The OIG audit revealed more than 34,000 escalated cases involving servicing fraud and regulatory violations filed with Freddie Mac and its eight largest mortgage servicers during a 14-month period between October 2011 and November 2012.
Freddie Mac pays mortgage servicers to collect loan payments and interact with consumers on a variety of issues, ranging from loan assistance to foreclosure alternatives.
“Freddie Mac’s oversight of service compliance has been inadequate,” the OIG report noted. “Strengthened oversight — through actions aimed specifically at improving servicer compliance with escalated case requirements — can benefit homeowners, Freddie Mac, and taxpayers.”
FHFA requires servicers to report on escalated cases and resolve them within 30 days. More than 20 percent were not taken care of within that window of time and about 98 percent of servicers failed to report on escalated cases as of December 2012.
One of the reasons cited for lack of compliance: cost. Servicers complained that meeting the 30-day timeframe can be expensive and require extra personnel to deal with the issues.
The OIG recommended that Freddie levy fines against servicers who fail to respond promptly to escalated cases.
According to the audit, of Freddie’s eight largest servicers (which handle almost 70 percent of the agency’s $10.6 million in mortgages), four did not even report any escalated cases even though they were handling some during the referenced 14-month period.
The report noted that Bank of America, Citigroup, Provident and Wells Fargo failed to comply with reporting requirements despite the fact that these servicers handled a combined 20,000 such cases. When the OIG contacted the servicers they agreed to begin reporting efforts.
Read the Federal Housing Finance Agency Office of the Inspector General’s audit report.