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Size of FHFA GSE examiner staff remains an issue

Inspector General concedes the agency has made improvements

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The Federal Housing Finance Agency (FHFA) managed to expand its core examination staff in the past year and a half, but it’s possible the agency still lacks the examination resources needed to ensure exams are done on time, a new report from the Federal Housing Finance Agency Office of the Inspector General (FHFA OIG) recently concluded.

Back in 2011, the FHFA inspector studied the examination practices of the GSE examiners and concluded that the FHFA fell behind in obtaining the correct number of examiners – and failed to ensure that many of its examiners were accredited through a professional commission program. 

Since then, the FHFA OIG says the GSE conservator has added seasoned experts to its staff and managed to beef up its examiner base overall.  

The agency increased its examiner list by 9%, growing from 131 examiners in September 2011 to 143 in October 2013. In making its new hires, the firm emphasized finding examiners with experience working at other financial regulators, the OIG regulator said.

The conservator also is in the early stages of implementing an examiner commission program.

But despite giving the FHFA much credit for all of its improvements, the inspector general said the agency has yet to roll out a streamlined process for determining the appropriate size of its core examination teams.

In its investigation, the OIG discovered that one core examination team ended up rescheduling the start of 38% of its scheduled exams in 2013. The delayed start-dates prompted the inspector to wonder if core teams are still lacking the needed staff.

As part of one of its recommendations, the inspector general said the FHFA should take "additional steps to ensure that its enterprise core teams are adequately staffed and thereby better positioned to fulfill their critical examination oversight responsibilities."

Other recommendations include a review of the agency’s 2013 examination plans – and a thorough analysis as to whether limited resources harbored or delayed investigations. The agency also recommends the implementation of a strategy to ensure core resources are in place to effectively handle exams.

The FHFA responded to the report, saying it has established onsite examination teams at both Fannie and Freddie, while issuing supervisory policies and updated exam procedures.

As to why some of the 2013 exams were delayed? The FHFA points to its general strategy of dealing with the riskiest developments first, and this strategy often leads to the rescheduling of examinations as the agency readjusts its schedule to prioritize.

"Within this framework, adjustments to examination schedules are both necessary and appropriate and are largely driven by emerging risks or unanticipated developments rather than inadequate resources as suggested by the FHFA-OIG," wrote Jon Greenlee, deputy director for the division of enterprise regulation; and Nina Nichols, deputy director for the division of supervision policy and support at the FHFA.

Click here to read the inspector general's full report on the FHFA examination process.

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