An investigation into the pre-foreclosure inspections conducted by mortgage giants Fannie Mae and Freddie Mac revealed several errors – including reports that possibly included fraudulent data – and raised “serious quality control issues,” claims a new report from the Office of Inspector General for the Federal Housing Finance Agency.
The report alleges that the Fannie Mae and Freddie Mac did “not have quality controls in place to obtain reasonable assurance that pre-foreclosure property inspection information is accurate, consistent, and complete.” The government-sponsored enterprises paid more than $91.2 million in pre-foreclosure property inspections in 2011 and 2012.
The report alleges that the property inspection reports contained inaccurate information as well as missing, manipulated, and blurry photographs. The report also accuses servicers of failing to have oversight procedures to evaluate vendors’ property inspection performance or validate the accuracy of the inspection reports. The Office of Inspector General report also says that the property inspection reports often did not even include the names or signatures of those who conducted the inspections.
The Office of Inspector General report also provided examples of offenses, including an allegation that one inspector who submitted an inspection report had appeared to just have copied information from a previous report for the assessment.
“There has been little attention provided to pre-foreclosure property inspections by both FHFA and [Fannie Mae and Freddie Mac],” according to the report. “Specifically, FHFA has not issued guidance to [Fannie Mae and Freddie Mac] related to the quality of pre-foreclosure property inspections and the agency has not conducted any targeted examinations of the [GSEs’] pre-foreclosure property inspection processes.”
OIG has advised the FHFA to direct Fannie and Freddie to assess the effectiveness of their pre-foreclosure property inspection processes as well as called on the agencies to establish uniform pre-foreclosure inspection quality standards and quality control processes for inspectors.
Source: “Report: Fannie, Freddie Foreclosure Inspectors Did Terrible Job,” HousingWire (March 25, 2014)