The Federal Housing Finance Agency should develop a formal review process for settlements that levy fees on lenders or take away their right to service home loans, according to a report from its watchdog.
The agency, which oversees government-backed mortgage firms Fannie Mae (FNMA:US) and Freddie Mac (FMCC:US), should have more formal policies to govern how it decides what banks must pay for missing foreclosure timelines and other actions, according to a report from the agency’s inspector general, Steve Linick. The FHFA agreed to enact the conclusions.
The report examined the FHFA’s review and approval of the $11.7 billion agreement between Bank of America Corp. (BAC:US) and Fannie Mae. The accord was designed to resolve most mortgage disputes between the two entities, and involved the bank paying $3.6 billion in cash, $6.75 billion to buy back residential loans sold to Fannie Mae, and $1.3 billion in fees for taking too long to assist or foreclose on overdue borrowers.
“There are several opportunities for improvement that FHFA might wish to consider,” according to the inspector general’s report. “The most important would be the development of procedures for settlements of compensatory fee claims and significant MSR transactions.”
The report said FHFA agreed with the inspector general’s findings and committed to establishing guidelines for fees of more than $50 million and servicing-rights transfers by Jan. 31.
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