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25 » VISIT US ONLINE @ DSNEWS.COM FHFA REPORT FINDS LACK OF COMPLIANCE, OVERSIGHT e Federal Housing Finance Agency (FHFA) Office of the Inspector General (OIG) released a report outlining conclusions drawn from a study done on the Servicing Alignment Initiative (SAI). e assessment of servicers provided by the FHFAOIG was far from glowing, citing specific areas of improvement for servicers of government- sponsored enterprise (GSE) mortgages, specifically those that service Fannie Mae and Freddie Mac. e survey covered FHFA's implementation and oversight of SAI during the period of January 1, 2011, through October 31, 2013. In 2011, the FHFA established SAI for the initial purpose, as noted in the report, to "improve mortgage servicing and limit enterprise (Fannie Mae and Freddie Mac) financial losses." To that end, a series of contractual provisions were re- quired by Fannie Mae and Freddie Mac. Servicers were required to comply with these new provi- sions when managing the accounts of financially distressed borrowers. "For example, servicers are required to respond to borrowers' requests for assistance within speci- fied time frames, and conduct loan modifications and foreclosures pursuant to procedures and dead- lines prescribed by FHFA," said the report. e FHFAOIG study provided two specific conclusions: an inability to oversee compliance procedures required by SAI and a lack of servicer compliance. First, the FHFA's Division of Housing Mis- sion and Goals (DHMG), primarily responsible for overseeing SAI and servicer compliance, noted limitations of the SAI and the Servicer Oversight Program (SOP). e report commented that "DHMG has neither reviewed nor evaluated the servicers' overall compliance with numerous SAI-related guidelines and performance goals even though they have been in place since 2011." e report says that DHMG is not in a position to assess the effectiveness of the GSE's initiatives to identify servicers' compliance with SAI. e report continued: "Moreover, DHMG does not require the enterprises to submit critical internal reports and reviews on servicers' SAI compliance that would be of benefit to the divi- sion's oversight program." Second, Fannie Mae and Freddie Mac indicated the existence of "considerable servicer non-compliance with SAI's requirements." In October, 2013, Fannie Mae and Freddie Mac found 63 SAI non-compliance findings in multiple areas, including untimely referrals to foreclosure and completed foreclosures, failure to solicit borrowers to consider foreclosure alterna- tives, and failure to respond timely to requests for foreclosure alternatives. An August, 2012, a servicer performance scorecard revealed nine out of 34 servicers gar- nered a rating of "needs significant improvement." e report commented that "DHMG did not develop and implement a process to deter- mine whether servicers were complying with the numerous requirements contained in the SAI- related servicing guidelines and meeting related performance goals." e FHFAOIG called for more monitoring and oversight in order to ensure provisions of SAI are followed. FHFA REPORTS MORTGAGE RATES DECREASED Contract mortgage interest rates decreased slightly from January to February, according to data from the Federal Housing Finance Agency (FHFA). e agency reported late March that the national average contract rate for the purchase of previously occupied homes was 4.3 percent for loans closed in late February, a decline of 0.07 percent. e interest rate survey also showed the av- erage rate on a conventional, 30-year fixed-rate mortgage was 4.45 percent, a drop of 22 basis points from January. e decline in the 30-year rate stands in contrast to Freddie Mac's weekly Primary Mortgage Market Survey, which shows rates starting the month at an average 4.23 percent and rising steadily over the weeks to finish at 4.37 percent. e effective interest rate was down 14 basis points, averaging 4.38 percent for the month. e effective rate accounts for the addition of initial fees and charges over the life of the mortgage. Overall, the contract rate on the composite of all mortgage loans was 4.22 percent, also down 14 basis points from 4.36 percent to start the year. As interest rates are typically locked in 30–45 days before a loan closes, February's data reflects market rates from mid- to late January. Meanwhile, the average loan amount for all loans was down $8,700 to an average $275,700, FHFA reports. AGGREGATE UNPAID PRINCIPAL BALANCE (UPB) OF MORTGAGE-RELATED INVESTMENT PORTFOLIO | MORTGAGE LOANS | MORTGAGE PURCHASES WHAT GOES UP MUST COME DOWN . . . AND THEN UP AGAIN The total mortgage portfolio for Freddie Mac increased in 2009 and 2013 but decreased in 2010, 2011, and 2012, while mortgage purchases increased in only 2011 and 2013. Source: FreddieMac.com *All data comes from completed year running January to December of that year. 2009 2010 2011 2012 2013 $755.3B $138.9B $172.7B $696.9B $234.8B $159.1B $653.4B $254.0B $177.4B $557.6B 221.4B $89.8B $461.1B $181.4B $142B

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