A report released Wednesday by the Federal Housing Finance Agency (FHFA) Office of the Inspector General (OIG) was critical of Fannie Mae and Freddie Mac’s collection of late fees. The report criticized the two for poor management of late fee collection, noting fees were either not consistently collected or collected at all.
Findings were outlined in FHFA Oversight of Enterprise Handling of Aged Repurchase Demands.
The report notes that the FHFA ordered Fannie Mae and Freddie Mac to "develop consistent timelines and collection standards for fees and penalties and additional types of penalties and remedies."
The FHFA let each enterprise establish its own model for penalizing servicers and collecting late fees.
As a result, Freddie Mac continued to employ its existing model for collecting late fees.
"By inconsistently waiving, enforcing, and excepting late fees through 2012, the Enterprise missed assessing up to $284 million in late fees that are now unlikely to be collected–losses that taxpayers ultimately bore," the report commented.
Worse yet, Fannie Mae collected no late fees, citing a concern over the projected $5.4 million implementation cost to manage late fee collection. However, the OIG charges Fannie Mae did not consider the benefits—potentially $284 million from 2009 to 2012.
The report also noted that Fannie Mae had a higher volume of unresolved repurchase demands than Freddie Mac, and could have potentially collected more than the estimated figure.
Ultimately, the FHFAOIG recommended 3 suggestions going forward.
First, quantify the benefit of implementing a repurchase late fee program at Fannie Mae to compare the cost versus benefits of the program.
Second, direct Freddie Mac to develop a late fee report to be routinely sent to FHFA that expands on information related to late fees.
Finally, direct Freddie Mac to provide FHFA with information on assessed but uncollected late fees associated with 2013 bulk settlements. The Inspector General wants the fees to be considered in the negotiations and documented in accordance with the Office of Conservatorship Operations (OCO)’s Settlement Policy.
FHFA agreed with OIG’s recommendations.