Fannie Mae and Freddie Mac failed to fully analyze data from the Uniform Collateral Data Portal and continue to take unnecessary risks when purchasing and guaranteeing single-family residential mortgages, according to a report from the Federal Housing Finance Agency’s Office of the Inspector General, Mortgage Daily reported Feb. 6.
The report indicated that the two government-sponsored enterprises are not taking full advantage of appraisal data collected through the UCDP that the Federal Housing Finance Agency directed the GSEs to use in 2010 in an effort to improve loan quality and risk management.
Mortgage Daily reported that the GSEs purchased and guaranteed six million loans valued at $1.3 trillion in 2012 alone. The UCDP was designed to make it easier for the GSEs to evaluate the large volume of loans that they are being asked to guarantee and purchase. The system notifies sellers if appraisals fail to meet Fannie and Freddie standards.
The OIG report indicated that Fannie and Freddie have failed to take full advantage of the UCDP, noting that 56,000 loans that the GSEs purchased between January and June 2013 showed potential violations of agency standards when run through the UCDP. Another 29,000 loans that the agencies acquired for $6.7 billion had zero property value or value that was questionable.
Mortgage Daily reported that the GSEs allegedly set up automatic overrides to allow sellers to disregard some issues. The suspected overrides also allowed the GSEs to accept 23 appraisals from suspended appraisers on $3.4 million worth of loans.
The OIG offered 14 recommendations to help the GSEs correct the issues, most of them related to increasing FHFA oversight of UCDP use. The OIG also is requiring Fannie and Freddie to resolve issues where loans show key warning messages before proceeding with their purchase.
The FHFA noted it will provide a status report on the changes by Jan. 31, 2015.