A new inspector general report indicates that the approval process at the Federal Housing Finance Agency for budgets at the government-sponsored enterprises was inadequate.
For the past three years since the Federal Housing Finance Agency has had to approve annual budgets for Fannie Mae and Freddie Mac, combined expenses are up over $1 billion.
The GSEs, which have been in conservatorship since September 2008, were required to begin obtaining FHFA approval for their annual operating budgets in November 2012.
Those were some of the details discussed in the 20-page $1.1 Billion Increase in Expenses for Fannie Mae and Freddie Mac from 2012 through 2015: Where the Money Went from the Federal Housing Finance Agency Office of Inspector General.
So far, since the regulatory change went into effect, FHFA has reviewed and approved Fannie Mae’s and Freddie Mac’s operating budgets for the years of 2013, 2014 and 2015.
According to the OIG, its evaluation determined that expenses between the pair of secondary lenders totaled
$5.1 billion last year, a significant increase over the $3.9 billion in combined operating budgets for 2012.
The FHFA’s budget-review and approval process didn’t achieve its stated purpose for reasserting its approval authority, according to the inspector general. This was due to late timing, cursory-level analysis and inadequate resources.
The report additionally indicated that shortcomings in FHFA’s process prevented it from exercising effective control over GSE spending.
Four actions were recommended by the OIG to address the shortcomings, of which FHFA agreed with three and “generally” agreed with the fourth.
“While we identified shortcomings with FHFA’s review and approval process in our earlier evaluation, we recognize that FHFA approved all of these increases and we do not seek to second-guess its decisions,” the report states. “As a consequence, we make no findings on the reasonableness of the net increases in expenses in this white paper.
