An examination office within the Federal Housing Finance Agency will finalize by March 2013 how it monitors changes in Fannie Mae and Freddie Mac mortgage underwriting guidelines.

Written guidance for how the reviews will be conducted are expected by September and could be implemented by the spring of next year, Wanda DeLeo, deputy director of examination programs at FHFA, said in a letter to the agency's inspector general earlier in the month.

According to an FHFA OIG report, evidence shows the agency lacks a formal review process even though the government-sponsored enterprises tightened standards on their own since the crisis.

Fannie and Freddie continue to report billions in credit losses from home loans written between 2005 and 2008. From January 2009, through the third quarter of 2011, Fannie Mae reported a total of $50 billion in single-family credit losses and $119 billion in credit-related expenses, mostly from these books alone. Combined, the GSEs took $183 billion in bailouts as of Dec. 31.

Formal underwriting guidelines haven't changed since the housing boom, but the amount of variances from the guidelines a GSE will allow — which are determined in private negotiations with the lenders — have been dramatically reduced.

These variances can often allow the lender to relax loan-to-value ratios, credit scores and verified income requirements and still be able to sell the mortgage to Fannie or Freddie.

Fannie Mae issued more than 11,000 guideline variances with more than 800 lenders in 2005, according to the FHFA OIG report.

As of September 2011, the amount of variances had been reduced to 638 with 188 lenders.

"Yet, FHFA does not formally review variances and, thus, it is not in a position to appreciate the nature and scope of the outstanding variances," according to the inspector general report. "Obtaining information about the variances would help to educate FHFA about existing increased credit risk and may improve examination guidance."

FHFA does conduct tests to measure the probability of a loan falling 90 days or more delinquent within one year of origination. These are called acquisition credit indices. The FHFA has an explicit goal for Fannie and Freddie to reach a 1% ACI score, meaning a loan has a 1% chance of falling 90-days delinquent within one year.

In 2007, Fannie Mae's average ACI was 2.22%. As of November 2011, Fannie reduced that number down to 0.18%, excluding Home Affordable Refinance Program loans.

The average credit score on Fannie Mae loans also increased 45 points since 2007 to an average of 762 for the 2011 book of business, according to the latest Fannie Mae financial filing.

Borrowers are making higher down payments, and average debt-to-income ratios have also declined.

Since being formed in 2011, the Office of Housing and Regulatory Policy within the FHFA worked on a system to track and review changes to the underwriting guidelines and variances, but as DeLeo said in the letter, the details are still being developed.

"The office followed the process, but had not yet issued the formal guidance as it continues to change and improve," DeLeo said in the letter.