The Office of the Inspector General for the Federal Housing Finance Agency concludes that given the size of Fannie Mae and Freddie Mac investment and role in the secondary market for multifamily loans, the agency can improve its examination policies.

According to FHFA-OIG, the FHFA can improve its confidence in efficacy of loan review during targeted examinations by providing examiners with guidance about sample selection and requiring them to maintain documentation adequate to support their sampling methodology.

“Lacking such instruction, FHFA examiners conducted targeted examinations of the Enterprises (that were supposed to have identical scopes and objectives) that varied significantly in terms of how samples of loans for review were selected for each Enterprise. Consequently, FHFA’s selection of loans in one of the examinations may not have been sufficient to give the agency reasonable assurance of the multifamily loans’ asset quality—one of the examination’s objectives,” the findings reported.

Several general issues and risk are associated with the Enterprises’ multifamily loan reviews.

For instance, the FHFA’s selection of 30 Fannie Mae loans from various risk categories and dollar values could have been adequately representative of the GSE’s loan population. 

However, the examiners did not retain documentation that was sufficient to fully merit the sampling methodology including the “scope and composition of Fannie Mae’s universe of multifamily loans.” 

On the other hand, FHFA’s examination of Freddie Mac’s asset quality may not have included a representative sample of loans.

For example, the same of 17 loans excluded more than half the Freddie Mac’s multifamily loans including major risk areas such as loans that are subject to relaxed underwriting standards. 

Click on the graph to view Freddie Mac’s multifamily loan approval authority.


Thus, the FHFA is encouraged to conduct thorough, comprehensive examinations because they form the basis for FHFA’s opinion on the safety and soundness of both GSEs. 

“These examinations are particularly critical to supervising risk given indications that the Enterprises are expanding their multifamily books of business and have relaxed some of their underwriting standards in the past. These standards have a direct, material impact on the level of risk associated with their multifamily loans,” the report said.

Furthermore, the OIC recommends that FHFA update its examination guide in consideration of industry standards by providing qualitative guidance for exams to follow when determining the sample size as well as testing coverage of loans files.

Additionally, the OIC recommends a requirement for examiners to maintain adequate documentation to support the sampling methodology developed in the updated examination guide.

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