FHFA Inspector: $353 million in criminal fines and restitution

Semiannual report delineates agency accomplishments

The Office of Inspector General for the Federal Housing Finance Agency released its eighth semiannual report to Congress, showing just how busy the FHFA has been for the past several months.

The report covers the OIG’s activities from April 1, 2014, to Sept. 30, 2014.

During this time, the OIG issued 15 audits, evaluations and other reports focusing on high-risk mission areas affecting the nation’s housing finance system. 

“These reports address a range of topics from Fannie Mae and Freddie Mac’s reliance on counterparties to comply with selling and servicing guidelines, to the financial impact of lender-placed insurance on the enterprises, to the progress of the development and implementation of the Common Securitization Platform,” the report said.

On the law enforcement side, the OIG’s investigative efforts resulted in the indictment of 121 individuals and the conviction of 67 individuals, as well as the award of more than $353 million in criminal fines and restitution orders.  

This is compared to the indictment of 82 individuals and the conviction of 62 individuals, as well as the award of more than $46 million in criminal fines and restitution orders in the seventh semiannual report, which was released in May.

Here are examples of two OIG investigations that produced significant results:

  • In August, Bank of America (BACannounced it reached a $16.65 billion settlement with the U.S. Department of Justice, certain federal agencies and six states to resolve claims over toxic residential mortgage-backed securities, collateralized debt obligations and an origination release on residential mortgage loans sold to Fannie Mae and Freddie Mac.
  • In July,Citigroup (C) announced a $7 billion dollar settlement with the U.S. Department of Justice, several state attorneys general, and the Federal Deposit Insurance Corporation to settle residential mortgage-backed securities and collateralized debt obligations after industry whispers that the bank was nearing a resolution.

The FHFA also prepared for the potential merger of two Federal Home Loan Banks: The Federal Home Loan Bank of Des Moines and the Federal Home Loan Bank of Seattle.  

The combined entities would provide funding solutions for more than 1,500 member financial institutions in 13 states. In addition, they would hold about $119 billion in assets.

Additionally, the report said some FHLBank members’ borrowing increased due to growth in economic activity. Overall demand for advances continued to increase due to high member borrowing, particularly by large-asset members.

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