federal housing finance agency (FHFA) office of the inspector general (OIG) determined that the FHFA complied with guidance relating to the Guardianship of Government-Sponsored Enterprises (GSEs). However, according to a new report from the FHFA OIG, staff turnover and extensive record-keeping issues have led to the loss of important documents.
Thank you for reading this post, don't forget to subscribe!As a result, new document retention practices must be implemented, the OIG said.
To compile the new report, the OIG reviewed decisions related to 40 GSE guardianship decisions that the agency made between July 1, 2020, and June 30, 2022. Most of the decisions reviewed by the OIG included supporting material, and the OIG was able to analyze, approve, and locate documents for 37 of the 40 decisions.
However, in three instances, “the FHFA could not provide the necessary FHFA director approval or documentation supporting the necessary analysis supporting the decision,” the OIG report said.
Because of this, the FHFA could not, according to the report, “provide full transparency regarding the appropriateness of these decisions or determine accountability for their approval.”
FHFA officials told the OIG that in these instances the records could not be found – and that the officials who were charged with analyzing and approving them were either no longer with the agency or had moved out of roles in that office. Were – and related responsibilities.
In addition, the OIG determined “multiple instances in which the FHFA’s guardianship decision policy and procedures did not align with the FHFA’s current practices or lacked clarity,” the report said.
Soon after the GSEs were placed under guardianship by the FHFA, it issued letters of instructions (LOIs) to its boards defining and outlining the scope of the authorities. The 2008 LOI was revised in 2012, and in December 2017, the FHFA issued another revision to the LOI that was effective in early 2018.
The report noted that related policies have not been revised since that time, however, “the FHFA’s practices, particularly related to decision approval authorities and guardianship monitoring and surveillance, have evolved.”
The lack of clear and comprehensive policies and procedures that are consistent with current practices can result in conservative decisions lacking analysis or approval, the report said, as well as “monitoring of activities performed and documented in accordance with the intentions of FHFA management.” Is performed.”
The OIG makes two recommendations in the report’s conclusion: 1.) FHFA’s Department of Custodianship Oversight and Readiness (DCOR) should reiterate documentation requirements and evaluate document management practices to determine needed improvements; and 2.) Guardianship decision policy and procedures should be updated to align with current practice.
In response to the findings and recommendations, the FHFA said it would “consult with other stakeholders on document management practices and assess the feasibility of reform” by January 31, 2024.
In addition, DCOR will conduct training for FHFA offices involved in GSE conservatorship by February 29, 2024, to reiterate the importance of documenting “all analyses, supporting documents, and evidence of director approval.”
The FHFA will also update its guardianship decision policy and procedures by January 31, 2024.
The agency said the update “will provide more clarity to approval authorities in issuing guardianship instructions and CSS decisions and to document established practice for issuing guidance decisions and de-escalating LOI decision requests.”
The OIG said it considers the FHFA’s planned reforms “responsive” to its recommendations.
