oversight

Fourteenth Semiannual Report to the Congress

Published by the Federal Housing Finance Agency, Office of Inspector General on 2017-09-30.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

F EDERAL H OUSING F INANCE A GENCY
   O FFICE OF I NSPECTOR G ENERAL
  S EMIANNUAL R EPORT            TO THE        C ONGRESS
         April 1, 2017, through September 30, 2017
F EDERAL H OUSING F INANCE A GENCY
   O FFICE OF I NSPECTOR G ENERAL




  S EMIANNUAL R EPORT      TO THE    C ONGRESS
     April 1, 2017, through September 30, 2017
Table of Contents
Our Mission                                                                      1
Core Values                                                                      2
Snapshot of OIG Accomplishments                                                  3
Snapshot of OIG Accomplishments Fiscal Year 2017                                 4
OIG Investigations Monetary Results October 1, 2016–September 30, 2017           5
A Message from the Inspector General                                             6
Executive Summary                                                                8
    Overview                                                                     8
    This Report                                                                  9
OIG’s Oversight                                                                 10
    OIG’s Risk-Based Oversight Strategy                                         10
    OIG Oversight Initiatives                                                   12
OIG’s Oversight of FHFA’s Programs and Operations Through Audit, Evaluation,
         and Compliance Activities During This Reporting Period                 14
    Oversight Activities This Period by Risk Area                               15
    Conservatorship Operations                                                  15
    Supervision of the Regulated Entities                                       19
    Information Technology Security                                             22
    Counterparties and Third Parties                                            25
    Agency Operations                                                           27
    Reports and Recommendations                                                 28
Oversight Through OIG’s Investigations                                          30
    Investigations: Civil Cases                                                 32
    Investigations: Criminal Cases                                              33
    Outreach                                                                    46
    Investigations: Administrative Actions                                      46
    Suspended Counterparty Referrals                                            46
OIG’s Regulatory Activities and Outreach                                        48
    Regulatory Activities                                                       48
    Public and Private Partnerships, Outreach, and Communications               48
Appendix A: Glossary and Acronyms                                               50
Appendix B: OIG Recommendations                                                 55
Appendix C: Information Required by the Inspector General Act                  115
Appendix D: OIG Reports                                                        120




                  Federal Housing Finance Agency Office of Inspector General
Appendix E: OI Publicly Reportable Investigative Outcomes Involving Condo
        Conversion and Builder Bailout Schemes                                   122
Appendix F: OI Publicly Reportable Investigative Outcomes Involving
        Loan Origination Schemes                                                 128
Appendix G: OI Publicly Reportable Investigative Outcomes
        Involving Short Sale Schemes                                             132
Appendix H: OI Publicly Reportable Investigative Outcomes Involving Loan
        Modifcation and Property Disposition Schemes                             135
Appendix I: OI Publicly Reportable Investigative Outcomes Involving
        Property Management and REO Schemes                                      140
Appendix J: OI Publicly Reportable Investigative Outcomes Involving Adverse
        Possession and Distressed Property Schemes                               142
Appendix K: OI Publicly Reportable Criminal Investigative Outcomes
        Involving RMBS Schemes                                                   143
Appendix L: OI Publicly Reportable Investigative Outcomes Involving
        Multifamily Schemes                                                      144
Appendix M: OI Publicly Reportable Investigative Outcomes Involving Fraud Affecting
        the Enterprises, the FHLBanks, or FHLBank Member Institutions            145
Appendix N: Endnotes                                                             151




             Semiannual Report to the Congress • April 1, 2017­–September 30, 2017
Our Vision
Our vision is to be an organization that promotes excellence and trust through exceptional
service to the Federal Housing Finance Agency (FHFA or Agency), Congress, stakeholders, and
the American people. The FHFA Office of Inspector General (OIG) achieves this vision by being
a first-rate independent oversight organization in the federal government that acts as a catalyst
for effective management, accountability, and positive change in FHFA and holds accountable
those, whether inside or outside of the federal government, who waste, steal, or abuse funds
in connection with the Agency, Fannie Mae and Freddie Mac (the Enterprises), or any of the
Federal Home Loan Banks (FHLBanks).


Our Mission
OIG promotes economy, efficiency, and effectiveness and protects FHFA and the entities it
regulates against fraud, waste, and abuse, contributing to the liquidity and stability of the nation’s
housing finance system. We accomplish this mission by providing independent, relevant, timely,
and transparent oversight of the Agency in order to promote accountability, integrity, economy,
and efficiency; advising the Director of the Agency and Congress; informing the public; and
engaging in robust enforcement efforts to protect the interests of the American taxpayers.




                          Semiannual Report to the Congress • April 1, 2017–September 30, 2017      1
Core Values
OIG’s core values are integrity, respect, professionalism, and results. Accordingly, we endeavor
to maintain the highest level of integrity, professionalism, accountability, and transparency in
our work. We follow the facts—wherever they go, without fear or favor; report findings that are
supported by sufficient evidence in accordance with professional standards; and recommend
actions tied to our findings. Our work is independent, risk-based, relevant, and timely. We play a
vital role in promoting the economy and efficiency in the management of the Agency and view
our oversight role both prospectively (advising the Agency on internal controls and oversight, for
example) and retrospectively (by assessing the Agency’s oversight of Fannie Mae, Freddie Mac,
and the Federal Home Loan Banks in its role as regulator, and its operation of Fannie Mae and
Freddie Mac in its role as conservator).

Because FHFA has been placed in the extraordinary role of regulator and conservator of the two
Enterprises, which support over $5 trillion in mortgage loans and guarantees, our oversight role
reaches matters delegated by FHFA to the Enterprises to ensure that the Enterprises are satisfying
their delegated responsibilities and that taxpayer monies are not wasted or misused.

We emphasize transparency in our oversight work to the fullest reasonable extent and in
accordance with our statutory obligations to foster accountability in the use of taxpayer monies
and program results. We seek to keep the Agency’s Director, members of Congress, and the
American taxpayers fully and currently informed of our oversight activities, including problems
and deficiencies in the Agency’s activities as regulator and conservator, and the need for
corrective action.

Report fraud, waste, or abuse by visiting www.fhfaoig.gov/ReportFraud or calling (800) 793-7724.




2    Federal Housing Finance Agency Offce of Inspector General
             Snapshot of OIG Accomplishments
                  SAR Reporting Period
                         April 1, 2017–September 30, 2017




REPORTS                               INVESTIGATIVE ACTIVITIES AND ACCOMPLISHMENTS

REPORTS ISSUED THIS                   Indictments/Charges                                        52
PERIOD: 18
                                      Arrests                                                    34
                                      Convictions/Pleas                                          56
Includes audits, evaluations, a
compliance review, special project    Sentencings                                                65
reports, a management alert, and      Suspension/Debarment Referrals To Other Agencies           34
white papers.                         Suspended Counterparty Referrals To FHFA                   26


RECOMMENDATIONS MADE
                                      MONETARY RESULTS FROM OIG INVESTIGATIONS
THIS PERIOD: 20

                                      Criminal Restitution                               $32,397,583
DOLLAR IMPACT                         Criminal Fines/Special Assessments/                $12,430,848
                                      Forfeitures
Questioned Costs       $32 million    Civil Settlements                                   $5,000,000


REPORT TOTAL: $32 MILLION             TOTAL INVESTIGATIONS MONETARY RESULTS: $49,828,431


                               INVESTIGATIONS TOTAL: $49,828,431

                                     REPORT TOTAL: $32,000,000

                          TOTAL OIG MONETARY RESULTS: $81,828,431




                            Semiannual Report to the Congress • April 1, 2017–September 30, 2017       3
                  Snapshot of OIG Accomplishments
                         Fiscal Year 2017
                          October 1, 2016–September 30, 2017




    REPORTS                                INVESTIGATIVE ACTIVITIES AND ACCOMPLISHMENTS

    REPORTS FOR FY 2017: 32                Indictments/Charges                                           123
                                           Arrests                                                        95
    Includes audits, evaluations,
                                           Convictions/Pleas                                             117
    compliance reports, special project
                                           Sentencings                                                   118
    reports, management alerts, white
    papers, and a risk assessment.         Suspension/Debarment Referrals To Other Agencies              106
                                           Suspended Counterparty Referrals To FHFA                       54
    RECOMMENDATIONS MADE
    FOR FY 2017: 35
                                           MONETARY RESULTS FROM OIG INVESTIGATIONS

                                           Criminal Restitution                                  $47,706,123
    DOLLAR IMPACT                          Criminal Fines/Special Assessments/                   $25,516,265
                                           Forfeitures
    Questioned Costs     $56.2 million                                                        $12,587,000,000
                                           Civil Settlements

    REPORT TOTAL: $56.2 MILLION            TOTAL INVESTIGATIONS MONETARY RESULTS: $12,660,222,388


                                 INVESTIGATIONS TOTAL: $12,660,222,388

                                          REPORT TOTAL: $56,200,000

                           TOTAL OIG MONETARY RESULTS: $12,716,422,388




4       Federal Housing Finance Agency Offce of Inspector General
           OIG Investigations Monetary Results
                   *DRAFT*	- FHFA-OIG work product. NOT FOR DISTRIBUTION OR	PUBLIC RELEASE
   10/12/2017	12:30	AM


              OIGOctober
                     Investigations            Monetary
                               1, 2016–September             30, Results
                                                                   2017

               October
OIG’s fiscal year 2017 (FY17)1,  2016–September
                              budget was $49.9 million, and was 30,     2017
                                                                 unchanged   from FY 2016.
During FY17, monetary results from OIG criminal and civil investigations are 253 times greater
than OIG’s budget, as demonstrated in Figure 1 (see below).
   OIG’s fiscal year 2017 (FY17) budget is $49.9 million. During fiscal year 2017, monetary results
   from OIG criminal and civil investigations are 253 times greater than OIG’s budget, as
   demonstrated in Figure 1 (see below).
                    Figure 1 OIG Criminal and Civil Investigations Monetary Results
                  October 1, 2016, Through September 30, 2017, vs FY17 OIG Budget
                       Figure 1. OIG Criminal and Civil Investigations Monetary Results
                      October 1, 2016, Through September 30, 2017, vs. FY17 OIG Budget


$14,000,000,000



$12,000,000,000



$10,000,000,000
                                 Criminal Results
                                   $73,222,388
 $8,000,000,000                          +
                                   Civil Results
                                 $12,587,000,000
 $6,000,000,000



 $4,000,000,000



 $2,000,000,000

                                                                                 $49,900,000
            $0
                               OIG Investigations                             FY17 OIG Budget
                                Monetary Results                        Oct 1, 2016, to Sept 30, 2017
                          Oct 1, 2016, to Sept 30, 2017
                                $12,660,222,388




   4   Federal Housing Finance Agency Office of Inspector General




                           Semiannual Report to the Congress • April 1, 2017–September 30, 2017         5
A Message from the Inspector General
I am pleased to present this Semiannual Report, which
covers the period from April 1, 2017, to September 30,
2017, on our efforts to promote the economy, efficiency,
and effectiveness of FHFA and protect FHFA, and
the entities that FHFA regulates against fraud, waste,
and abuse, through independent, relevant, timely, and
transparent oversight and robust law enforcement efforts.

Created by statute in July 2008, FHFA is charged with
serving as regulator of the Enterprises and the FHLBanks.
Additionally, in September 2008, FHFA placed the
Enterprises in conservatorship and undertook the
extraordinary dual role of supervisor and conservator.
FHFA’s conservatorships of the Enterprises, now in
their tenth year, are of unprecedented scope, scale, and
complexity. FHFA continues to serve in a unique role: it
is both conservator and regulator of the Enterprises and
regulator of the FHLBanks, and these dual roles present
novel challenges.                                                 Laura S Wertheimer
                                                                  Inspector General of the Federal
Because of the unique, dual responsibilities undertaken           Housing Finance Agency
by FHFA, we must structure our oversight program to
examine FHFA’s exercise of its responsibilities, which
differ significantly from the typical federal financial regulator. OIG seeks to be a voice for, and
protect the interests of, those who have funded Treasury’s investment in the Enterprises—the
American taxpayers.

To best leverage our resources to strengthen OIG’s oversight, our work is risk-based and
is focused on the four major management and performance challenges facing FHFA, the
Enterprises in its conservatorship, and the entities it regulates, that we identified at the beginning
of Fiscal Year (FY) 2017. (See OIG, Fiscal Year 2017 Management and Performance Challenges
(October 6, 2016), online at www.fhfaoig.gov/Content/Files/FHFA%20management%20
challenges%20FY2017.pdf.) During FY17, we published 32 reports, including audits,
evaluations, compliance reviews, management alerts, special reports, and status reports, of
which 18 were published during this semiannual period. All of these reports are available on our
website, https://www.fhfaoig.gov, and on https://oversight.gov/, a publicly accessible, searchable
website containing the latest public reports from federal Inspectors General who are members of
the Council of the Inspectors General on Integrity and Efficiency.

Where our fact-finding has identified shortcomings, or processes that could be upgraded, our
reports include actionable recommendations to assist FHFA in improving its effectiveness and
efficiency. In this Semiannual Report, we continue our efforts to increase the transparency
of our work for the public, Congress, and other stakeholders by summarizing all of our
recommendations that were made, remain outstanding (and unimplemented), or were closed



6    Federal Housing Finance Agency Offce of Inspector General
during the reporting period. See Appendix B. During each reporting period, we update
information in Appendix B as new recommendations are issued or are closed, and we publish the
updated information periodically in a Compendium of Open Recommendations on our website.
(See OIG, Compendium of Open Recommendations (October 2017) online at www.fhfaoig.gov/
reports/compendium_of_recommendations.)

Because we recognize that the best deterrent against mortgage and financial institutional fraud
is a proactive and visible criminal law enforcement effort, our Office of Investigations conducts
vigorous investigations into a wide variety of potential fraud schemes. Working closely with
prosecutors, we follow the evidence wherever it leads to develop sufficient evidence to prove the
elements of a crime and hold those persons accountable who seek to prey on innocent victims
and defraud the regulated entities. When we do not find evidence sufficient to refer the matter to
prosecutors to consider bringing criminal charges, we examine whether the evidence supports
civil claims.

During this reporting period, OIG successfully conducted a number of investigations involving
civil and criminal fraud, which resulted in significant criminal prosecutions and civil fraud
enforcement, including:

• 52 indictments/charges;

• 56 convictions/pleas;

• 65 sentencings;

• More than $44 million in criminal restitutions, fines, special assessments, and forfeitures; and

• $5 million in civil settlements.

Through our written reports and our law enforcement efforts, both civilly and criminally,
we hold institutions and their officials accountable for their actions or inactions. The work
described in this Semiannual Report demonstrates the importance of effective, fair, and
objective oversight conducted by OIG.

The accomplishments described in this Semiannual Report are a credit to the talented and
dedicated professionals that I have the privilege to lead.


Laura S. Wertheimer
Inspector General
October 31, 2017




                          Semiannual Report to the Congress • April 1, 2017–September 30, 2017       7
Executive Summary
Overview                                             tenth year, FHFA’s conservatorships of the
                                                     Enterprises are of unprecedented scope,
The Federal Housing Finance Agency                   scale, and complexity. Since September 2008,
(FHFA or Agency) was created on July 30,             FHFA has served in the unique role of both
2008, when the President signed into law             conservator and regulator of the Enterprises
the Housing and Economic Recovery Act                and regulator of the FHLBank System.
of 2008 (HERA) * HERA charged FHFA                   HERA also amended the Inspector General
to serve as regulator of Fannie Mae and              Act of 1978 to establish an Office of
Freddie Mac (the Enterprises) and of the             Inspector General (OIG) within FHFA. OIG
Federal Home Loan Bank (FHLBank) System              began operations on October 12, 2010, when
(collectively, the government-sponsored              its first Inspector General (IG) was sworn in.
enterprises, or the GSEs) and enhanced its           Because FHFA has acted as both regulator
resolution authority.                                and conservator of the Enterprises since
                                                     September 2008, OIG’s responsibilities are
In September 2008, FHFA exercised its                correspondingly broader than those of an
authority under HERA to place Fannie Mae             IG for any other prudential federal financial
and Freddie Mac into conservatorship in an           regulator because they include oversight of
effort to stabilize the residential mortgage         FHFA’s actions as conservator to protect the
finance market. Concurrently, the Department         U.S. taxpayers’ investment of $187.5 billion
of the Treasury (Treasury) entered into a Senior     in the Enterprises.
Preferred Stock Purchase Agreement (PSPA)
with each Enterprise to ensure that each             Our mission is to promote economy,
maintained a positive net worth going forward.       efficiency, and effectiveness and protect
Under these PSPAs, U.S. taxpayers, through           FHFA and the entities it regulates against
Treasury, have invested a total of $187.5 billion    fraud, waste, and abuse, contributing to
into the Enterprises since 2008. As conservator      the liquidity and stability of the nation’s
of the Enterprises, FHFA succeeded to all            housing finance system. We accomplish
rights and powers of any stockholder, officer,       our mission by providing independent,
or director of the Enterprises and is authorized     relevant, timely, and transparent oversight to
under HERA to:                                       promote accountability, integrity, economy,
                                                     and efficiency; advising the Director of the
• Operate the Enterprises and                        Agency and Congress; informing the public;
• Take such action as may be:                        and engaging in robust enforcement efforts to
    o Necessary to put the Enterprises in a          protect the interests of the American taxpayers.
      sound and solvent condition and
    o Appropriate to carry on the Enterprises’       OIG’s operations are funded by annual
      business and preserve and conserve the         assessments that FHFA levies on the
      Enterprises’ assets and property.              Enterprises and the FHLBanks pursuant to 12
                                                     U.S.C. § 4516. For FY17, OIG’s operating
Initially, the conservatorships were intended        budget was $49.9 million.
to be a “time out” during a period of extreme
stress to stabilize the mortgage markets and
promote financial stability. Now in their



8    Federal Housing Finance Agency Offce of Inspector General
This Report
                                                     *Terms and phrases in bold are defned
This Semiannual Report to the Congress               in Appendix A, Glossary and Acronyms.
summarizes the work of OIG and discusses             If you are readin an electronic version
OIG operations for the reporting period of           of this Semiannual Report, then simply
April 1, 2017, to September 30, 2017. Among          move your cursor to the term or phrase
other things, this report:                           and click for the defnition.

• Explains OIG’s risk-based oversight strategy;
• Discusses the 18 audit, evaluation, and
  compliance reviews, management alerts,
  special reports, and white papers published
  during the period;
• Highlights some of the numerous OIG
  investigations that resulted in 52 indictments/
  charges, 56 convictions/pleas, and 65
  sentencings of individuals responsible for
  fraud, waste, or abuse in connection with
  programs and operations of FHFA and
  the Enterprises; more than $44 million
  in criminal restitutions, fines, special
  assessments, and forfeitures; and $5 million
  in civil settlements;
• Summarizes OIG’s outreach during the
  reporting period; and
• Reviews the status of OIG’s
  audit, evaluation, and compliance
  recommendations.




                         Semiannual Report to the Congress • April 1, 2017–September 30, 2017   9
OIG’s Oversight
OIG’s Risk-Based Oversight                             out” during which the Enterprises would be
Strategy                                               stabilized, enabling the “new Congress and
                                                       the next Administration [to] decide what role
Currently, FHFA serves as supervisor of                government in general, and these entities in
the Enterprises and the FHLBanks and as                particular, should play in the housing market.”
conservator of the Enterprises. FHFA’s                 The current FHFA Director has echoed
conservatorships of the Enterprises, now in            that view, recognizing that conservatorship
their tenth year, are of unprecedented scope,          “cannot [and] should not be a permanent
scale, and complexity. FHFA serves in a unique         state” for the Enterprises. However, putting
role: it is both conservator and supervisor of         the Enterprises into conservatorships has
the Enterprises and regulator of the FHLBanks,         proven to be far easier than taking them
and these dual roles present novel challenges.         out, and the “time out” period for the
Consequently, OIG must structure its oversight         conservatorships is now in its tenth year.
program to examine FHFA’s exercise of its
dual responsibilities, which differ significantly      Earlier in conservatorship, the Enterprises
from the typical federal financial regulator.          required $187.5 billion in financial
Beginning in Fall 2014, OIG determined to              investment from Treasury to avert their
focus its resources on programs and operations         insolvency. Through September 2017, the
that pose the greatest financial, governance,          Enterprises have paid to Treasury more than
and/or reputational risk to the Agency, the            $275 billion in dividends on its investment.
Enterprises, and the FHLBanks in order to best         Despite their high leverage, lack of capital,
leverage its resources to strengthen oversight.        conservatorship status, and uncertain
We established an integrated approach to               future, the Enterprises have grown in size
identify these programs and operations of              during conservatorship, and, according
greatest risk and published our risk-based             to FHFA, their combined market share of
Audit and Evaluation Plan in February 2015,            newly issued mortgage-backed securities
which has been updated annually.                       (MBS) is more than 60%. The Enterprises’
                                                       combined total assets are approximately $5.3
Our current Audit and Evaluation Plan,                 trillion and their combined debt exceeds $5
adopted in March 2017, builds on the top               trillion. Although market conditions have
management and performance challenges that             improved and the Enterprises have returned
faced FHFA in FY17. (Our current Audit and             to profitability, their ability to sustain
Evaluation Plan is available at www.fhfaoig.           profitability in the future cannot be assured
gov/Reports/AuditAndEvaluationPlan.) These             for a number of reasons: the winding down
challenges include:                                    of their investment portfolios and reduction
                                                       in net interest income; the level of guarantee
• Conservatorship Operations. Since                    fees they will be able to charge and keep;
  September 2008, FHFA has administered two            the future performance of their business
  conservatorships of unprecedented scope and          segments; the elimination by 2018 of a
  undetermined duration. When then-Secretary           capital cushion to buffer against losses; and
  of the Treasury Henry Paulson announced              the significant uncertainties involving key
  the conservatorships in September 2008, he           market drivers such as mortgage rates, homes
  explained that they were meant to be a “time         prices, and credit standards.



10     Federal Housing Finance Agency Offce of Inspector General
 Under HERA, FHFA’s actions as conservator          These systems manage processes to guarantee
 are not subject to judicial review or              and purchase loans, supporting more than
 intervention, nor are they subject to              $5 trillion in Fannie Mae and Freddie Mac
 procedural safeguards that are ordinarily          mortgage assets. Both Enterprises and
 applicable to regulatory activities such           the FHLBanks have been the subject of
 as rulemaking. As conservator of the               cyberattacks, though none caused significant
 Enterprises, FHFA exercises control over           harm. All entities regulated by FHFA
 trillions of dollars in assets and billions of     acknowledge that the substantial precautions
 dollars in revenue and makes business and          put into place to protect their information
 policy decisions that influence and affect the     systems might be vulnerable, and penetration
 entire mortgage finance industry.                  of their systems poses a material risk to their
                                                    business operations. Further, the Enterprises
• Supervision of the Regulated Entities.            are increasingly relying on third-party service
  As discussed earlier, FHFA plays a unique         providers, which requires the sharing of
  role as both conservator and regulator for        sensitive information between Enterprise and
  the Enterprises and as regulator for the          third-party systems.
  FHLBank System. FHFA has repeatedly
  stated that effective supervision of the        • Counterparties and Third Parties. The
  FHLBanks and the Enterprises is critical to       Enterprises rely heavily on counterparties
  ensuring their safety and soundness. Within       and third parties for a wide array of
  FHFA, the Division of Federal Home Loan           professional services, including mortgage
  Bank Regulation (DBR) is responsible for          origination and servicing. That reliance
  supervision of the FHLBanks. Section 20 of        exposes the Enterprises to counterparty
  the Federal Home Loan Bank Act requires           risk—the risk that the counterparty will not
  each FHLBank to be examined at least              meet its contractual obligations. FHFA has
  annually. FHFA’s Division of Enterprise           delegated to the Enterprises the management
  Regulation (DER) is responsible for               of their relationships with counterparties,
  supervision of the Enterprises. Section 1317      and FHFA reviews that management largely
  of the Federal Housing Enterprises Financial      through its supervisory activities. As
  Safety and Soundness Act of 1992, as              participants in the mortgage market change,
  amended, requires FHFA to conduct annual          counterparties can affect the risks to be
  on-site examinations of each Enterprise           managed by Fannie Mae and Freddie Mac. In
  (codified at 12 U.S.C. § 4517). FHFA’s            recent years, the Enterprises’ businesses have
  annual examination program assesses Fannie        changed dramatically in terms of the types of
  Mae’s and Freddie Mac’s financial safety          institutions originating and selling mortgages to
  and soundness and overall risk management         them and servicing mortgages on their behalf.
  practices through ongoing monitoring,
  targeted examinations, and risk assessments.    OIG continued to focus much of its oversight
                                                  during this reporting period on identifying
• Information Technology Security. Systems        vulnerabilities in these areas, recommending
  security continues to be a preeminent           positive, meaningful actions that the Agency
  issue for businesses and individuals alike.     could take to mitigate these risks, and fulfilling
  The regulated entities, like most modern        its statutory mandates.
  institutions, rely on numerous, complex
  information technology (IT) systems to
  conduct almost every aspect of their work.



                       Semiannual Report to the Congress • April 1, 2017–September 30, 2017       11
OIG Oversight Initiatives                            administration of its Suspended Counterparty
                                                     Program; and FHFA’s award of housing
In addition to adopting a risk-based strategy for    examiner commissions to examiners
OIG oversight, during the tenure of Inspector        commissioned by other regulators.
General Wertheimer, OIG has developed and
implemented new initiatives and enhanced             Offce of Compliance and
existing processes to strengthen its oversight       Special Projects
and provide FHFA with critical information
necessary to improve its programs and                In December 2014, OIG created an Office
operations. In our last semiannual report,           of Compliance and Special Projects (OCom)
we provided highlights of those oversight            to strengthen OIG’s efforts to determine
initiatives, which we briefly summarize here.        whether FHFA has fully implemented
                                                     OIG recommendations and to undertake
Management Alerts                                    other special projects. Verification testing
                                                     conducted by this office of FHFA’s actual
OIG issues management alerts to make                 implementation efforts holds FHFA
FHFA aware of a significant matter requiring         accountable for the corrective actions it has
its immediate attention. During Inspector            agreed to undertake. OCom issues compliance
General Wertheimer’s tenure, OIG has                 review reports based on its efforts to verify
issued five alerts. In this reporting period,        that FHFA has implemented the corrective
one alert was issued relating to the lack of         actions it has agreed to undertake. In
clarity in the responsibilities reserved to the      addition to holding FHFA accountable for
Nominating and Governance Committee of               implementing such corrective actions, OCom
the Freddie Mac Board of Directors to address        reports on whether FHFA’s implementation
and resolve potential conflicts of interest          efforts have corrected the shortcomings
involving Freddie Mac executive officers.            identified by OIG in its initial report. OCom’s
                                                     compliance reviews strengthen OIG’s efforts
Special Reports and                                  to stimulate positive change in critical areas
Status Reports                                       and promote the economy, efficiency, and
                                                     effectiveness of FHFA.
As we have explained, the unique dual
responsibilities undertaken by FHFA as               OCom issued one compliance review during
conservator and supervisor require OIG to            this reporting period in which we found
structure its oversight program to examine           that several key elements of the procedures
FHFA’s exercise of its dual responsibilities.        adopted by FHFA, which were intended to
OIG issues special reports and status reports        provide it with a consistent approach for
to inform FHFA senior management, the                analyzing, deciding on, and monitoring the
public, Congress, and other stakeholders             administrative operating budgets proposed by
of significant developments involving                each Enterprise, either were not implemented
ongoing FHFA projects and initiatives                or were implemented but feedback was not
previously assessed by OIG. During this              provided by stakeholders to inform FHFA’s
reporting period, OIG issued three special           review and analysis.
reports: FHFA’s oversight from July 2016
to August 2017 of Fannie Mae’s delegated             OCom also conducts reviews and
responsibilities to build-out its newly              administrative investigations of hotline
leased space in Washington, D.C.; FHFA’s             complaints alleging non-criminal misconduct



12     Federal Housing Finance Agency Offce of Inspector General
and undertakes special projects. For example,
OCom led a review into the merits of a
hotline complaint alleging improprieties by an
FHLBank.

Offce of Risk Analysis

Central to OIG’s ability to vigorously oversee
the Agency’s programs and operations is our
ability to identify and assess emerging risks
and revise our work plan to accommodate
them. To assist in executing this portion of
OIG’s mission, the Office of Risk Analysis
(ORA) was established. ORA is tasked with
identifying, analyzing, monitoring, and
prioritizing emerging and ongoing risks and
with educating stakeholders on those issues.
During this reporting period, ORA issued one
white paper discussing Enterprise participation
in purchasing multifamily mortgages. While
the Enterprises are closely associated with
purchases of single family mortgages, they
have also played a substantial role in purchases
of multifamily mortgages and their multifamily
lending businesses are fundamentally different
from their single-family business lines. In
light of heightened public interest in the
future structure of the housing finance system,
OIG prepared this white paper to explain the
Enterprises’ role in the multifamily market, a
critical aspect of the housing finance system.
(See OIG, Fannie Mae and Freddie Mac in the
Multifamily Market (WPR-2017-002,
September 7, 2017), online at www.fhfaoig.
gov/Reports/Whitepaper.)




                       Semiannual Report to the Congress • April 1, 2017–September 30, 2017   13
OIG’s Oversight of FHFA’s Programs and Operations
Through Audit, Evaluation, and Compliance
Activities During This Reporting Period

OIG fulfills its mission through audits,            CIGIE established for inspections and
evaluations, compliance and special                 evaluations, which are known as the Quality
projects, management alerts, and through            Standards for Inspection and Evaluation
investigations. In this section, OIG discusses      (Blue Book).
its oversight activities through three of its
operational offices: the Office of Audits,          Offce of Compliance and
the Office of Evaluations, and the Office of        Special Projects
Compliance and Special Projects. During this
reporting period, OIG published 17 reports          The Office of Compliance and Special
from these offices. All but one of these            Projects (OCom) addresses the reputational
reports (which is a statutorily required audit      risk arising from the practical necessity of
on improper payments) tie to the four major         closing OIG recommendations based largely
management and performance challenges we            upon representations from the Agency.
identified to FHFA at the beginning of FY17.        Pursuant to the Inspector General Act, IGs
                                                    recommend remedial actions to correct
Offce of Audits                                     shortcomings identified through reviews of
                                                    agency programs and operations. When an
The Office of Audits (OA) conducts                  agency accepts an IG recommendation and
independent performance audits with respect         takes steps to implement the corrective action,
to the Agency’s programs and operations. OA         the agency reports on its efforts to the IG
also undertakes projects to address statutory       and the IG typically relies on materials and
requirements and stakeholder requests.              representations from the agency to close the
As required by the Inspector General Act,           recommendation.
OA performs its audits in accordance with
the audit standards promulgated by the              OCom is charged with several critical
Comptroller General of the United States,           responsibilities. First, it consults with
which are known as generally accepted               each division in the development of
government auditing standards or GAGAS.             recommendations to ensure that such
                                                    recommendations, if accepted and
Offce of Evaluations                                implemented, will be susceptible to follow-up
                                                    verification testing. Second, it tracks, in real
The Office of Evaluations (OE) conducts             time, the status of all OIG recommendations,
program and management assessments and              from issuance to closure to subsequent
makes recommendations for improvement               follow-up and testing. Third, it consults
where applicable. OE provides independent           with each division prior to closure of a
and objective reviews, studies, and analyses        recommendation to facilitate application of a
of FHFA’s programs and operations. Under            single standard across the office for closing
the Inspector General Reform Act of 2008,           recommendations. Last, it conducts testing
IGs are required to adhere to the specific          on closed recommendations to independently
professional standards designated by the            verify whether FHFA has implemented in full
Council of the Inspectors General on Integrity      the corrective actions it represented to OIG
and Efficiency (CIGIE). OE performs its             that it intended to take. The results of OCom’s
evaluations in accordance with the standards        testing are published in compliance reviews.



14    Federal Housing Finance Agency Offce of Inspector General
OCom also undertakes special projects,            shortcomings. In May 2016, in response
which include reviews and administrative          to our recommendations, FHFA issued its
investigations of hotline complaints alleging     Enterprise Administrative Budget Oversight
non-criminal misconduct and assessments           Procedures, a set of procedures to enhance
of significant ongoing issues that, in OIG’s      its budget review and approval process and to
view, require prompt attention from FHFA          address the shortcomings we identified.
leadership. OCom performs its compliance
reviews and special projects in accordance        We conducted a compliance review to
with the Blue Book.                               assess whether FHFA followed the written
                                                  procedures it had adopted to analyze the
Oversight Activities This                         Enterprises’ proposed operating budgets for
Period by Risk Area                               2017, the first budget cycle governed by those
                                                  procedures. We found that FHFA required the
Our Audit and Evaluation Plan identifies the      Enterprises to submit draft operating budgets
four risk areas on which our audit, evaluation,   for 2017 during the fourth quarter of 2016
and compliance projects have been focused.        and that FHFA completed its review and
We now discuss our oversight activities           approval of the final proposed budgets prior
during the reporting period, executed by OA,      to December 31, 2016. As a result, Enterprise
OE, and OCom, by risk area.                       spending for 2017, both in amount and
                                                  direction, was reviewed and approved by the
Conservatorship Operations                        FHFA Director prior to the start of 2017.

Non-Delegated Matter: FHFA Review of              We also found that several key elements
the Enterprises’ Annual Budgets                   in FHFA’s revised budget review process
                                                  either were not implemented or were
In November 2012, FHFA, acting as                 implemented but feedback was not
conservator for the Enterprises, rescinded        provided by stakeholders to the Division of
the Enterprises’ authority to approve their       Conservatorship (DOC) to inform its review
annual budgets and required Agency review         and analysis.
and approval. FHFA’s stated purpose for
that action was “to ensure that Enterprise        Because 2016 was the first year in which
budgets [are] properly aligned with both          the revised budget process was used, we
FHFA’s strategic direction and its safety and     suggested that DOC leadership more closely
soundness priorities.” FHFA has reviewed and      oversee the process in 2017 to ensure that all
approved the Enterprises’ annual operating        of its elements are implemented. (See OIG,
budgets for fiscal years subsequent to 2012.      Compliance Review of FHFA’s Process for
In September 2015, we issued an evaluation        Reviewing the Enterprises’ Annual Operating
report that assessed whether FHFA’s budget        Budgets (COM-2017-006, September 19,
approval process, as implemented, had been        2017), online at www.fhfaoig.gov/Reports/
effective in ensuring that Enterprise budgets     Compliance_Reviews).
aligned with FHFA’s strategic initiatives
and safety and soundness priorities. We           Non-delegated Matter: Existing Statutory
found that shortcomings in this process had       Capital Requirements for the Enterprises
not permitted FHFA to achieve the stated
purpose for its required approval and made        The purpose of capital is to provide a
specific recommendations to address these         financial cushion to absorb unexpected



                       Semiannual Report to the Congress • April 1, 2017–September 30, 2017   15
losses and to support a business’ operations.       the Agency approved the project, the plans
Consistent with this concept, FHFA has              for it included high-end features, and the
recognized that in the case of the Enterprises,     FHFA official responsible for overseeing
capital provides a measure of assurance that        the build-out was unaware of the escalating
the Enterprises will continue to operate, honor     costs. We found that the projected cost of the
their obligations, and fulfill their statutory      build-out presented significant financial and
mission, without the need for a draw from           reputational risks that warranted “immediate,
the Treasury. The Safety and Soundness              sustained, and comprehensive oversight” from
Act of 1992 established the “minimum                FHFA, Fannie Mae’s conservator.
capital” required of the Enterprises. In July
2008, HERA, which amended the Safety                In our Management Alert, we found that
and Soundness Act, maintained the existing          such oversight by Fannie Mae’s conservator
minimum capital requirements in the Safety          required it to determine whether the
and Soundness Act, and authorized the               efficiencies of the upgrades specified by
Enterprises’ newly created regulator, FHFA,         Fannie Mae justified their estimated costs
to “establish, by regulation, new permanent         and whether such upgrades were cost-
minimum capital requirements that are               effective or appropriate for an entity in a
higher than the requirements under existing         federal conservatorship with an uncertain
statutory authority.”                               future to install in leased commercial space.
                                                    In our view, that standard was consistent
We published this white paper to explain            with FHFA’s statutory duties, as conservator,
the current statutory and regulatory capital        to “preserve and conserve the assets and
requirements for the Enterprises, which             property” of Fannie Mae. The Agency did
have been in place since 1992, as well as           not challenge, or object to, our finding that
explain the Enterprises’ reported capital           it should review the efficiencies of specific
shortfalls. (See OIG, Existing Statutory            upgrades against their costs and determine
Capital Requirements for Fannie Mae and             whether they were “appropriate for an entity
Freddie Mac (WPR-2017-001, August 17,               in conservatorship.” We recommended
2017), online at www.fhfaoig.gov/Reports/           that the Agency ensure that it had adequate
Whitepapers).                                       staff, contractors, or both to oversee the
                                                    build-out and budgets, and that it receive
Delegated Matter: Special Report:                   regular updates from Fannie Mae. The
Update on FHFA’s Oversight of Fannie                Agency accepted our recommendations and
Mae’s Build-Out of its Newly Leased                 committed to “implement them to the extent
Class A Offce Space in Midtown Center               that [it was] not already doing so.”

In September 2017, we issued a Special
Report updating the status of Fannie
Mae’s build-out of its headquarters in
Washington, D.C. In June 2016, we had
issued a Management Alert regarding FHFA’s
oversight of Fannie Mae’s plans to build-
out its newly leased Class A office space
and attendant costs. At that time, we learned
that the project’s build-out costs had risen
dramatically during the 14 months since



16    Federal Housing Finance Agency Offce of Inspector General
We conducted this subsequent review to             has not determined, as conservator, whether
assess FHFA’s oversight of Fannie Mae’s            any, or all, of the individual upgrades “over
build-out of the new headquarters over the         and above” Class A space are appropriate
past year. We found that FHFA established a        expenditures for an entity in conservatorship
four-member committee under the leadership         with an uncertain future to install in leased
of the Acting Deputy Director for DOC              commercial space, we questioned the basis
and retained an expert to conduct a value          for all upgrades above $175 per rentable
engineering and benchmarking study. FHFA           square foot, totaling $32 million. (See OIG,
did not provide its expert with a standard         Special Report: Update on FHFA’s Oversight
with which to conduct the study that               of Fannie Mae’s Build-Out of its Newly
reflected Fannie Mae’s status as an entity in      Leased Class A Office Space in Midtown
federal conservatorship with an unknown            Center (COM-2017-007, September 28,
future. Instead, it directed its expert, in its    2017), online at www.fhfaoig.gov/Reports/
Statement of Work, to compare the project          StatusReports.)
design activities and costs to industry
and government benchmarks and propose              Delegated Matter: FHFA Oversight
multiple benchmarks for FHFA to select             of Freddie Mac Board of Directors’
from. FHFA’s expert proposed this standard:        Execution of Ethics Governance
whether the upgrades specified by Fannie           Responsibilities
Mae were reasonable when compared against
the upgrades selected by major financial           During the previous semiannual period, OIG
institutions and large public sector agencies,     completed an administrative investigation
including FHFA, for their space. The               of a conflict of interest issue involving an
Committee endorsed and FHFA approved the           entity within our oversight authority. Based
expert’s proposed standard.                        on the findings from that investigation, we
                                                   commenced an evaluation to assess FHFA’s
                                                   oversight, as conservator, over the Freddie
                                                   Mac Board of Directors regarding the
                                                   execution of its responsibilities relating to
                                                   potential conflicts of interest disclosed by
                                                   executive officers.

                                                   During the course of our fieldwork, we
                                                   learned that the Freddie Mac Board of
                                                   Directors added a provision to the charter of
                                                   its Nominating and Governance Committee
                                                   (NGC) in June 2016, charging the NGC with
                                                   the responsibility to “review and address
In our view, that standard relied on by            any conflicts of interest involving directors
FHFA and its expert—whether the upgrades           or executive officers.” The revised NGC
selected were reasonable when compared to          Charter contains no delegation of these
the upgrades in the headquarters of major          responsibilities and does not authorize the
financial institutions—is inconsistent with        NGC to task any Freddie Mac employee with
FHFA’s statutory duties, as conservator,           executing these responsibilities. We confirmed
to “preserve and conserve the assets and           that Freddie Mac had not revised its conflict
property” of Fannie Mae. Because FHFA              of interest-related policies, as of mid-June



                        Semiannual Report to the Congress • April 1, 2017–September 30, 2017   17
2017, to recognize the NGC’s authority              Alert: Need for Increased Oversight by FHFA,
and responsibility to “review and address”          as Conservator, to Ensure that Freddie Mac’s
conflicts of interest. Under FHFA’s corporate       Policies and Procedures for Resolution of
governance regulations, each Enterprise Board       Executive Officer Conflicts of Interest Align
of Directors retains ultimate responsibility        with the Responsibilities of the Nominating
for oversight of the Enterprise’s operations,       and Governance Committee of the Freddie
a responsibility that cannot be delegated           Mac Board of Directors (OIG-2017-005,
to management. FHFA further expects that            September 27, 2017), online at www.fhfaoig.
each Enterprise Board of Directors “shall           gov/Reports/ManagementAlerts.)
remain reasonably informed of the condition,
activities, and operations of the entity.”          Delegated Matter: NPL Sales: Additional
                                                    Controls Would Increase Compliance
We found that Freddie Mac had not revised           with FHFA’s Sales Requirements
its policies and procedures that address
resolution of conflicts of interest involving       The Enterprises provide liquidity to the
executive officers to align with the NGC’s          housing finance system by purchasing
duties set forth in its charter. We also found      residential mortgages. Historically, the
that Freddie Mac lacked a formal structure          Enterprises have either packaged these
to escalate potential conflicts of interest         mortgages into mortgage-backed securities
involving executive officers to the NGC             that were, in turn, sold to investors, or held
for it to “review and address” or for routine       them in a retained portfolio. Also in the
reporting to the NGC on executive officers’         retained portfolios are non-performing loans
existing conflicts and their mitigation. As         (NPL) that the Enterprises purchase out of
a result, we concluded that there was a             mortgage-backed securities to make investors
significant risk that the NGC will not be able      whole and facilitate loss mitigation.
to meet its obligations under its charter and
that risk warranted oversight from FHFA, the        After the Enterprises were placed into
conservator of Freddie Mac.                         conservatorship in 2008, the Department of
                                                    the Treasury provided financial support to
We recommended that FHFA, as conservator,           the Enterprises pursuant to Preferred Stock
direct the Board to clarify the scope of the        Purchase Agreements (PSPAs), which have
NGC’s responsibilities under its charter            been amended several times. The PSPAs,
that relate to conflicts of interest involving      as amended in 2012, require, among other
executive officers and direct Freddie Mac           things, the Enterprises to reduce their retained
to revise its policies and procedures to align      portfolio to no more than $250 billion for
with and facilitate the execution of the            each Enterprise by December 31, 2018.
responsibilities assigned to the NGC. FHFA
agreed with both recommendations. It also           In 2015, FHFA granted approval to the
agreed that the language of the NGC charter         Enterprises to sell NPLs, pursuant to sales
and Freddie Mac’s codes and policies should         requirements that included bidder qualifications,
be clarified and that appropriate procedures        bidding transparency, loan modification
for routine reporting of conflict of interest       protocols, loss mitigation protocols, handling
matters for executive officers to the NGC           sales of foreclosed properties, handling loans
should be adopted. FHFA expects to issue            by subsequent servicers, and post-sale reporting
a directive to Freddie Mac no later than            from the buyer of the loans regarding borrower
February 25, 2018. (See OIG, Management             and neighborhood outcomes. According to



18    Federal Housing Finance Agency Offce of Inspector General
FHFA, NPL sales by the Enterprises act to            monitoring activities. At the conclusion of
reduce the number of delinquent loans held in        each annual supervisory cycle, FHFA prepares
their retained portfolios and transfer credit risk   and transmits a report of examination (ROE)
to the private sector.                               to the board of directors for each Enterprise.
                                                     The annual ROE constitutes DER’s “primary
We performed this audit to determine (1) what        work product that communicates . . . the
analyses FHFA performed prior to its decision        cumulative results of [DER’s] supervisory
to approve NPL sales and (2) FHFA’s controls         activities conducted during the annual
over NPL sales to ensure that the Enterprises        examination cycle.” Each ROE also
met FHFA’s established requirements.                 contains numerical ratings that FHFA
We found that FHFA followed prescribed               assigns for seven component areas, a rating
protocols and processes in authorizing               system known as CAMELSO. In addition,
the Enterprises to sell NPLs. Once FHFA              FHFA assigns a composite rating for each
authorized NPL sales, it expected the                Enterprise’s overall safety, soundness, and
Enterprises to establish controls to ensure          risk management practices.
compliance with FHFA’s NPL sales
requirements. FHFA oversees NPL sales by             In this evaluation, we reviewed DER’s
the Enterprises by reviewing aggregated data         processes for assigning CAMELSO ratings
provided by the Enterprises.                         to the Enterprises and documenting the
                                                     bases for those ratings. We found that DER
We found that the templates used by the              examination managers prepare a draft ROE
Enterprises did not contain some data fields         narrative that contains a proposed rating for
that would be necessary for the Enterprises          each CAMELSO component within their
to determine buyer/servicer compliance with          purview. The examination managers then
FHFA’s sales requirements. We also determined        submit their draft narratives to the examiner-
that inquiries made during our fieldwork caused      in-charge (EIC), who edits the narratives
one Enterprise to identify possible violations of    and compiles them into a draft ROE for the
the no “walkaways” sales requirement.                Deputy Director’s approval.

FHFA agreed with our three recommendations           During our fieldwork, we learned that
to enhance its ability to monitor                    DER’s independent quality control review
Enterprise sales of NPLs. (See OIG,                  program, which was intended to confirm
NPL Sales: Additional Controls Would                 that examination findings and conclusions
Increase Compliance with FHFA’s Sales                are adequately supported before DER
Requirements (AUD-2017-006, July 24,                 communicates them to the Enterprises, did
2017), online at www.fhfaoig.gov/Reports/            not meet the requirements established by
AuditsAndEvaluations.)                               FHFA in a 2013 supervision directive. Instead
                                                     of performing a quality control review of the
Supervision of the                                   ROEs or the CAMELSO ratings before either
Regulated Entities                                   was transmitted to an Enterprise, as required
                                                     by the 2013 directive, DER performed quality
Supervision of the Enterprises: Gap in               control reviews of certain examination
DER’s Quality Control Review Program                 findings and conclusions. According to a DER
                                                     official, these quality control reviews made
Each year, DER supervises the Enterprises            it unnecessary to perform quality control
through targeted examinations and ongoing            reviews of the ROEs and the CAMELSO



                          Semiannual Report to the Congress • April 1, 2017–September 30, 2017   19
ratings because the information on which            after reviewing DER records indicating the
they were based had already been subjected          four MRAs continued to be “open” more than
to quality control review. We found, however,       three and a half years after their issuance.
that DER did not perform quality control
reviews for ongoing monitoring activities that      DER issued the four MRAs in December
did not result in findings communicated to the      2011. In June and December 2012, the
Enterprises in writing.                             Enterprise submitted closure packages to
                                                    DER and asserted that management had
We determined that the ROEs issued to the           fully addressed the MRAs. DER examiners
Enterprises for the 2015 supervisory cycle          concluded in March 2013 that the Enterprise
contained conclusions derived from ongoing          had remediated the MRAs. In June 2013, the
monitoring activities that had not been subject     then-DER EIC sent the Enterprise a non-
to a quality control review, which increased        objection letter, informing the Enterprise that
the risk that an ROE may inaccurately report        DER had no objections to the MRA closure
that an Enterprise is meeting supervisory           packages; however, the EIC did not close the
expectations or making progress in                  MRAs at that time.
addressing weaknesses.
                                                    DER changed its practice for assessing
DER agreed with our recommendation to               remediation and closing MRAs. In April
enhance its quality control review program          2013, a month after examiners concluded that
to reach all conclusions from ongoing               the MRAs had been sufficiently remediated,
monitoring activities and represented that          DER issued an operating procedures bulletin
it would amend its quality control review           that called for an Enterprise’s internal audit
guidance by August 1, 2018. (See OIG,               function to validate that management’s MRA
The Gap in FHFA’s Quality Control Review            remediation was complete and consistent
Program Increases the Risk of Inaccurate            with the remediation plan. Under the new
Conclusions in its Reports of Examination           operating procedure, DER examiners would
of Fannie Mae and Freddie Mac (EVL-                 assess the Enterprise’s remediation activities
2017-006, August 17, 2017), online at www.          through ongoing monitoring, including
fhfaoig.gov/Reports/AuditsAndEvaluations.)          reviewing Internal Audit’s validation work.

Supervision of the Enterprises: DER’s               According to DER documents, the
Closure of Four Matters Requiring                   Enterprise’s Internal Audit completed
Attention                                           validation of the four MRAs by January
                                                    2015. In December 2015, a DER examiner
During this semiannual report period, we            determined that the Enterprise had completed
closed a review of DER’s supervision of             the actions required to address the MRAs.
an Enterprise’s remediation of four Matters         DER issued a “remediation letter” to the
Requiring Attention (MRAs). Under FHFA’s            Enterprise on January 29, 2016, informing the
Advisory Bulletin 2012-01, Categories of            Enterprise that FHFA considers the MRAs to
Examination Findings, which was in effect           be satisfactorily addressed, and DER closed
at the time that DER issued the four MRAs,          the MRAs. Given DER’s conclusion that
“MRAs are the most serious supervisory              the MRAs were satisfactorily remediated
matters” and “require prompt remediation by         and are now closed, we determined that
the regulated entity and timely follow-up by        an evaluation of DER’s supervision of the
FHFA.” OIG initiated the review in July 2015        Enterprise’s remediation of these MRAs



20    Federal Housing Finance Agency Offce of Inspector General
was not warranted and closed this review.         determinations (97%). Our review identified
(See OIG, Closure of OIG Review of FHFA’s         no systemic weakness in FHFA’s efforts to
Supervision of an Enterprise’s Remediation of     determine eligibility for HFE commissions.
Matters Requiring Attention (ESR-2017-005;        (See OIG, FHFA’s Compliance with its
June 12, 2017), online at www.fhfaoig.gov/        Documentary Standards for Issuing Housing
Reports/AuditsAndEvaluations.)                    Finance Examiner Commissions (COM-2017-
                                                  004, July 25, 2017), online at www.fhfaoig.
Supervision of the Regulated Entities:            gov/Reports/StatusReports.)
FHFA’s Compliance with its Documentary
Standards for Issuing Housing Finance             Supervision of the FHLBanks: FHFA’s
Examiner Commissions                              Examination Program for the FHLBanks’
                                                  Internal Audit Functions Was Adequately
In 2011, FHFA officials reported to us            Designed and Executed
that the efficiency and effectiveness of
the Agency’s examination program were             In this audit, we assessed whether FHFA’s
impeded by an insufficient number of              DBR examination program for internal
commissioned examiners. According to              audit functions within the FHLBank System
FHFA, commissioned examiners have the             was adequately designed, if examination
skills and technical knowledge necessary to       activities were executed and documented,
lead the examination of a major risk area at      and if supervisory determinations were
the entities it supervises. In June 2013, FHFA    supported. For this audit, we reviewed DBR’s
established its Housing Finance Examiner          examinations of the internal audit functions of
Program (HFE Program) to enhance the              the 11 FHLBanks and the Office of Finance
efficiency and effectiveness of its examination   for two examination cycles. In total, we
program for Fannie Mae, Freddie Mac, and          reviewed 22 DBR examinations of internal
the Federal Home Loan Banks. According            audit functions of the FHLBanks and the
to FHFA, commissioned examiners have the          Office of Finance.
skills and technical knowledge necessary to
lead an examination of a major risk area that     We found that DBR’s examination program
it supervises. Under the HFE Program, an          for internal audit functions within the
examiner may receive an HFE commission in         FHLBank System was adequately designed
one of two ways. One way is to provide FHFA       and executed in a manner that provided
with specific documentation that another          adequate examination coverage during the
financial regulator has awarded a safety and      review period. With two exceptions, we found
soundness commission previously. Between          that examination documentation supported
June 2013 and February 2017, FHFA made            DBR’s supervisory determinations with
eligibility determinations for 70 employees       regard to FHLBanks’ internal audit functions
who claimed to have earned commissions            during the review period. We determined
from other financial regulators: it deemed 69     the two exceptions were non-systemic;
of the 70 to be eligible for commissions.         accordingly, we made no recommendations.
                                                  (See OIG, FHFA’s Examination Program for
We undertook this review to verify whether        the FHLBanks’ Internal Audit Functions Was
FHFA satisfied its own standards when it          Adequately Designed and Executed (AUD-
made eligibility determinations for these         2017-003, May 5, 2017), online at www.
70 HFE commission applicants. We found            fhfaoig.gov/Reports/AuditsAndEvaluations.)
that FHFA met its standards for 68 of its 70



                       Semiannual Report to the Congress • April 1, 2017–September 30, 2017   21
Information Technology                              For Fannie Mae, we found that DER did not
Security                                            establish a link in its supervisory planning
                                                    documents to the risks it identified in its
DER Failed to Complete Many                         Operational Risk Assessment for the 2016
Planned Supervisory Activities for the              examination cycle. We were not able to
2016 Examination Cycle Related to                   confirm whether all the risks identified in
Cybersecurity Risks at the Enterprises              that Operational Risk Assessment could be
                                                    tracked to planned cybersecurity supervisory
The Enterprises store, process, and transmit        activities. We also could not determine
significant amounts of financial data and           whether the planned supervisory activities
personally identifiable information (PII) in        addressed the risks DER considered the most
connection with their mission to support the        critical for the Enterprise because DER did
secondary mortgage market. FHFA recognizes          not identify which risks were the most critical
that cybersecurity is a significant risk for        in either the Operational Risk Assessment or
both Enterprises in light of the frequency          the Supervisory Strategy.
and sophistication of attacks on information
technology systems of financial institutions.       We found that DER did not complete any of
In its 2015 Performance and Accountability          its supervisory activities relating to Fannie
Report (PAR), the Agency represented that:          Mae’s current cybersecurity risks planned
“A key objective of FHFA’s supervisory work         for the 2016 examination cycle during that
will continue to be the effective oversight of      cycle. As revised at mid-year, those planned
how each Enterprise manages cyber risks and         activities included one targeted examination
addresses vulnerabilities.”                         and three ongoing monitoring activities. We
                                                    determined that DER completed its ongoing
During this semiannual reporting period, we         monitoring of Fannie Mae’s remediation of
completed separate audits addressing aspects        three cybersecurity-related MRAs issued in
of DER’s supervision of cybersecurity risks         prior years. We could not reconcile FHFA’s
for Fannie Mae and Freddie Mac during the           representations that cybersecurity supervisory
2016 examination cycle. The audits had two          activities would be a key objective of FHFA’s
objectives. First, we sought to determine           supervisory work during the 2016 supervisory
whether the supervisory activities planned          cycle with DER’s inability to complete any of
by DER relating to each Enterprise’s                four planned supervisory activities relating to
cybersecurity risks for the 2016 examination        Fannie Mae’s cybersecurity risks during the
cycle addressed the cybersecurity risks             2016 examination cycle.
highlighted in its risk assessments and
supervisory strategies for the Enterprises,         As part of this audit, we reviewed an August
applying the standard adopted by FHFA.              2016 memorandum by DER staff to explain
Second, we sought to determine whether              the reasons for the mid-year revisions to the
cybersecurity-related planned supervisory           2016 supervisory plan which reported: “a
activities for the 2016 examination cycle           number of staffing and structural changes
were completed during that cycle in light of        in 2016...directly impacted execution of the
FHFA’s representations in its 2015 PAR that         2016 examination plan.” That memorandum
“a key objective of FHFA’s supervisory work”        stated that all ongoing monitoring activities
during 2016 would be oversight of how the           and targeted examinations for 2016 were
Enterprises managed their cyber risk and            “descoped due to the limited time available
addressed vulnerabilities.                          due to the focus on MRA closure.”



22    Federal Housing Finance Agency Offce of Inspector General
A reasonable inference from this                  years) meant that it had no findings to
memorandum is that DER staff held the view        report in the section of the 2016 ROE
that DER lacked a sufficient complement           titled “Information Security and Cyber-
of examiners to adequately perform its            Security.” Lacking supervisory information
supervisory responsibilities.                     relating to the management of information
                                                  security risks to report in the ROE, DER
We raised the same concern in an audit issued     summarized the conclusions reached by
on September 30, 2016, in which we found          Fannie Mae’s Internal Audit function and
that DER failed to conduct and complete           by a contractor retained by Fannie Mae to
more than half of its planned targeted            perform a cyber risk assessment. We warned
examinations of Fannie Mae for the 2012           that there is a significant risk that DER’s
to 2015 examination cycles and completed          inability to complete any of its planned
no targeted examinations planned for the          supervisory activities relating to Fannie Mae’s
2015 examination cycle before the 2015            management of its cybersecurity risks and
ROE issued. We reported that the reason           reliance on conclusions reached by Fannie
repeatedly provided by DER examiners and          Mae’s Internal Audit and its contractor
the then-current EIC for this failure was         deprived Fannie Mae’s Board of Directors
resource constraints, notwithstanding the         with information necessary to execute the
consistent position of DER leadership and         cyber risk management responsibilities
FHFA senior leadership that DER had an            delegated to it by FHFA. (See OIG, FHFA
adequate complement of examiners to meet          Failed to Complete Non-MRA Supervisory
its supervisory responsibilities. Our findings    Activities Related to Cybersecurity Risks
in this 2017 audit—that DER completed none        at Fannie Mae Planned for the 2016
of its planned supervisory activities for the     Examination Cycle (AUD-2017-010,
2016 examination cycle relating to Fannie         September 27, 2017), online at www.fhfaoig.
Mae’s management of its cybersecurity             gov/Reports/AuditsAndEvaluations.)
risks—caused us to renew the caution we
issued previously:                                For Freddie Mac, we found that DER did
                                                  not establish a link between the objectives
   For a federal financial regulator,             of the planned supervisory activities and
   responsible for supervising two                the cybersecurity risks. However, we were
   Enterprises that together own or guarantee     able to link the cybersecurity risks identified
   more than $5 trillion in mortgage assets       in the Operational Risk Assessment to the
   and operate in conservatorship, to fail to     objectives for three of the five non-MRA
   complete a substantial number of planned       planned cybersecurity supervisory activities
   targeted examinations, including failure to    for this cycle. We were not able to link the
   complete any of its 2015 planned targeted      stated objectives for two of the five planned
   examinations for Fannie Mae within the         supervisory activities to cybersecurity
   2015 supervisory cycle, is an unsound          risks identified in DER’s Operational Risk
   supervisory practice and strategy.             Assessment. For the 2016 examination cycle,
                                                  DER planned two targeted examinations
We also found that DER’s failure to               at Freddie Mac, three ongoing monitoring
complete any of its planned supervisory           activities relating to cybersecurity risks
activities during 2016 relating to Fannie         at Freddie Mac, and one other ongoing
Mae’s management of cybersecurity risk            monitoring activity regarding Freddie Mac’s
(other than closing MRAs issued in prior          effort to remediate an MRA issued by DER



                       Semiannual Report to the Congress • April 1, 2017–September 30, 2017    23
in a prior year. We found that DER did              implementation of this section and report the
not complete one of its planned targeted            results of our review to the Congress.
examinations until after the 2016 ROE issued
on March 10, 2017, and deferred the other.          We contracted with the independent
We also found that DER completed the                certified public accounting firm of Kearney
three planned ongoing monitoring activities         & Company, P.C. (Kearney) to conduct a
relating to cybersecurity risks at Freddie Mac      performance audit to meet our reporting
as well as the planned MRA remediation              requirement under 42 U.S.C. § 2000ee-2. The
ongoing monitoring activity. (See OIG, FHFA         objective of the audit was to report on the
Did Not Complete All Planned Supervisory            effectiveness of FHFA’s information security
Activities Related to Cybersecurity Risks           and privacy practices with a focus on FHFA’s
at Freddie Mac for the 2016 Examination             implementation of privacy controls and the
Cycle (AUD-2017-011, September 27,                  nine requirements identified in 42 U.S.C. §
2017), online at www.fhfaoig.gov/Reports/           2000ee-2. Based on its audit work, Kearney
AuditsAndEvaluations.)                              concluded that FHFA effectively implemented
                                                    seven of the nine privacy requirements in 42
We made specific recommendations to address         U.S.C. § 2000ee-2, in addition to applicable
the shortcomings identified in our audits. In       privacy controls listed under the National
its written management responses, FHFA              Institute of Standards and Technology Special
agreed that cybersecurity is a significant area     Publication 800-53, Rev. 4, Appendix J,
for risk management by the Enterprises and is       Privacy Controls Catalog. In its report,
a critical component of FHFA’s supervision of       Kearney made six recommendations to ensure
the Enterprises. FHFA represented that it was       FHFA identifies, monitors, and protects the
working to improve its supervision protocols        PII it collects and to ensure that privileged
and processes to more effectively identify          user access is approved and documented.
cybersecurity risks and address them in DER’s       In its management response, FHFA agreed
examination activities and identified a number      to implement the recommended corrective
of planned corrective actions.                      actions. (See OIG, Performance Audit of the
                                                    Federal Housing Finance Agency’s (FHFA)
Statutory Audit: Performance Audit of               Privacy Program (AUD-2017-007, August
the Federal Housing Finance Agency’s                30, 2017), online at www.fhfaoig.gov/
(FHFA) Privacy Program                              Reports/AuditsAndEvaluations.)

42 U.S.C. § 2000ee-2 requires FHFA to               FHFA’s Processes for General Support
establish and implement comprehensive               System Component Inventory Need
privacy and data protection procedures              Improvement
governing the agency’s collection, use,
sharing, disclosure, transfer, storage, and         We conducted this performance audit to
security of information in an identifiable form     determine whether FHFA has an effective
related to employees and the public. Such           process for managing its inventory of
procedures are to be consistent with legal          information system components for the
and regulatory guidance, including OMB              FHFA General Support System. Because
Regulations, the Privacy Act of 1974, and           information in the audit report could
section 208 of the E-Government Act of 2002.        be used to circumvent FHFA’s internal
42 U.S.C. § 2000ee-2 also requires the OIG          controls, it has not been released publicly.
to periodically conduct a review of FHFA’s          (See OIG, FHFA’s Processes for General



24    Federal Housing Finance Agency Offce of Inspector General
Support System Component Inventory Need            doing business with counterparties found
Improvement (AUD-2017-005, May 25,                 to have engaged in covered misconduct. As
2017), online at www.fhfaoig.gov/Reports/          of December 31, 2016, OGC had a backlog
AuditsAndEvaluations.)                             of 424 referrals from other agencies, the
                                                   majority of which had been pending for
Counterparties and                                 a year or more. OGC’s failure to resolve
Third Parties                                      referrals on a timely basis is consequential:
                                                   we identified five instances in which OGC
FHFA Should Improve its Administration             did not resolve referrals within a three-year
of the Suspended Counterparty Program              period after a finding of covered misconduct,
                                                   which precluded the suspending official from
The Enterprises and the FHLBanks have              determining whether the counterparty should
adopted counterparty risk management               be suspended under the SCP.
programs designed to protect them
from excessive financial loss caused by            Further, we found the length of three
deterioration in a counterparty’s financial        suspensions fell short of the periods called for
condition. FHFA adopted the Suspended              in the Agency’s internal guidelines and that
Counterparty Program (SCP) in June 2012 to         the Agency did not document the mitigating
augment the regulated entities’ programs and       factors that support the shorter suspensions,
provide them with additional protection from       in contravention of FHFA’s Records
the financial and reputational risks posed by      Management Policy.
individuals and businesses with a history of
engaging in fraudulent conduct.                    We recommended that FHFA establish
                                                   a plan to reduce the SCP backlog and
FHFA promulgated interim and final rules           document its reasons for any departures
requiring each regulated entity to refer to        from the suspension periods prescribed
FHFA a current or former counterparty or           in its guidelines. FHFA agreed with our
an affiliate that has been convicted of, or        recommendations. (See OIG, FHFA Should
sanctioned administratively for, engaging          Improve its Administration of the Suspended
in mortgage-related fraud or other financial       Counterparty Program (COM-2017-005,
misconduct within the last three years             July 31, 2017), online at www.fhfaoig.gov/
(covered misconduct). The interim and final        Reports/StatusReports.)
rules also limit FHFA’s authority to suspend a
current and former counterparty or an affiliate    Implementation by the Enterprises of
to a three-year period after a conviction or       the New Representation and Warranty
administrative sanction was imposed for            Framework
covered misconduct.
                                                   Fannie Mae and Freddie Mac provide
We assessed the FHFA Office of General             liquidity to the U.S. housing finance system
Counsel’s (OGC) administration of the              by purchasing residential mortgages from
SCP to determine whether the program is            lenders and bundling the purchased mortgages
achieving its stated objective. We found           into securities for which they guarantee
deficiencies in OGC’s administration of the        principal and interest. In guaranteeing
SCP, the remediation of which could enable         the securities, the Enterprises assume the
the program to effectively limit the regulated     credit risk from possible default of the
entities’ exposure to the risks inherent in        underlying mortgages. To mitigate this risk,



                        Semiannual Report to the Congress • April 1, 2017–September 30, 2017    25
the Enterprises require lenders that sell           for the 2015 and 2016 examination cycles
the residential mortgages to make specific          could be tracked to its risk assessments and
contractual representations and warranties in       supervisory strategies for each Enterprise
which they represent that the mortgages meet        and (2) whether DER executed these planned
specific underwriting standards. Historically,      supervisory activities during the 2015 and
the Enterprises relied on the lenders’              2016 examination cycles. As part of our work,
representations and warranties and conducted        we also assessed whether the objectives of the
limited due diligence at the time the               planned supervisory activities during the 2015
mortgages were purchased. When mortgages            and 2016 examination cycles would provide
defaulted or the borrower missed payments,          for the testing of controls to mitigate the risks
the Enterprises would review the loan files         identified with the new framework.
for evidence of breach of the representations
and warranties and exercise their contractual       For Fannie Mae, during the 2015 examination
rights to require lenders to repurchase, or buy     cycle, we found that DER identified risks with
back, non-compliant loans. The Enterprises’         respect to the Enterprise’s implementation
contractual rights to put back non-compliant        of the new framework. We also found
loans at any point during the term of the           that DER planned a targeted examination
loans enabled the Enterprises to reduce losses      of Fannie Mae’s quality control function
caused by underwriting defects.                     during the 2015 examination cycle and
                                                    that the objectives of that planned targeted
In September 2012, FHFA announced                   examination, if completed as stated, would
that the Enterprises would launch a new             provide for the testing of controls to mitigate
representation and warranty framework               the risks identified with the new framework.
(new framework). The objective of the new
framework was to enhance transparency               In March 2016, DER issued the ROE for
and certainty for lenders by clarifying             the 2015 examination cycle in which DER
when a mortgage loan may be subject to              reported on the results of the targeted
repurchase. The new framework, designed             examination of Fannie Mae’s quality control
by the Enterprises to meet FHFA’s objective,        function. We found, however, that no
shifted some risk of non-compliance with            independent quality control review of this
representations and warranties from the             examination was conducted before the ROE
lenders to the Enterprises (and therefore to        issued, contrary to FHFA policy. Reporting
taxpayers). The new framework required              examination findings in an ROE before
operational changes at the Enterprises to           they are vetted through a quality control
mitigate the additional risk, and FHFA              process creates a risk that DER could provide
recognized the need to test the adequacy            misinformation to the Enterprise and its
of those changes, through its supervisory           Board. DER did not identify risks associated
activities, to ensure the risk was mitigated.       with the new framework as a specific
                                                    supervisory focus for the Fannie Mae 2016
During this semiannual reporting period,            examination cycle and did not perform any
we completed separate audits of DER’s               new framework-related supervisory activities
supervision over each Enterprise’s                  during 2016.
implementation of the new framework to
assess (1) whether DER’s planned supervisory        To address the weaknesses identified in
activities relating to the Enterprises’             this audit, we recommended that FHFA
implementation of the new framework                 reinforce FHFA and DER guidance and hold



26    Federal Housing Finance Agency Offce of Inspector General
DER leadership accountable to ensure that         examinations, deferred the other to 2017, and
targeted examination conclusions presented        completed the planned ongoing monitoring
in the ROE are based on work that has either      activity. We made no recommendations in
undergone quality control review and been         our audit report. (See OIG, FHFA’s 2015
communicated in writing to the Enterprise,        and 2016 Supervisory Activities, as Planned,
or the required quality control review has        Addressed Identified Risks with Freddie
been waived by the Deputy Director of DER         Mac’s New Representation and Warranty
and documented in writing. In a written           Framework (AUD-2017-009, September 22,
management response, FHFA disagreed               2017), online at www.fhfaoig.gov/Reports/
with various statements in the report and the     AuditsAndEvaluations.)
finding but agreed with our recommendation.
In this regard, FHFA stated that by January       Agency Operations
31, 2018, DER will provide training to
all examination staff with regard to what         Statutory Audit: FHFA Complied
should be included in the 2017 ROEs and           with Applicable Improper Payment
by September 1, 2018, DER will amend              Requirements During Fiscal Year 2016
its existing internal guidance to define the
term “examination conclusions” to clarify         The Improper Payments Information Act of
what language must go through a quality           2002 (IPIA), as amended by the Improper
control review before being included in the       Payments Elimination and Recovery Act of
ROE. (See OIG, FHFA’s 2015 Report of              2010 (IPERA) and the Improper Payments
Examination to Fannie Mae Failed to Follow        Elimination and Recovery Improvement
FHFA’s Standards Because It Reported on           Act of 2012 (IPERIA) (collectively, IPIA,
an Incomplete Targeted Examination of             as amended), requires federal agencies to
the Enterprise’s New Representation and           periodically review, estimate, and report
Warranty Framework (AUD-2017-008,                 programs and activities that may be
September 22, 2017), online at www.fhfaoig.       susceptible to significant improper payments.
gov/Reports/AuditsAndEvaluations.)                IPIA was amended by IPERA to direct
                                                  federal Inspectors General to determine
For Freddie Mac, during the 2015                  annually whether their respective agencies
examination cycle, we found that DER              are in compliance with the statute and to
identified risks with respect to Freddie Mac’s    submit a report to the head of the agency,
implementation of the new framework. To           Congressional oversight committees, the
address the identified risks, DER, as planned,    Comptroller General of the United States, and
performed two ongoing monitoring activities       the controller of the Office of Management
related to Enterprise risk management issues.     and Budget (OMB).
For the 2016 examination cycle, we found
that DER identified the new framework as          FHFA, through its Office of General Counsel,
a supervisory focus. DER’s 2016 Freddie           maintains that most requirements of the
Mac supervisory plan included three               IPIA, as amended, are not applicable to the
framework-related targeted examinations           Agency because those requirements apply
and one ongoing monitoring activity. These        only to payments made with federal funds
supervisory activities tracked to the new         and FHFA does not finance its operations
framework-related risks identified in the risk    with federal funds. That said, FHFA asserts
assessment. During the examination cycle,         that it has put into place internal controls
DER completed two of the planned targeted         to achieve the intent of IPIA, as amended.



                       Semiannual Report to the Congress • April 1, 2017–September 30, 2017   27
We conducted a performance audit to assess          Reports and
the Agency’s compliance with the IPIA, as           Recommendations
amended, for fiscal year 2016. We found
that FHFA complied with the applicable              Below are the 18 audits, evaluations,
provisions of the IPIA, as amended, as well         compliance reports, management alerts,
as related criteria established by OMB.             special reports, and white papers published
(See OIG, FHFA Complied with Applicable             during the period. See www.fhfaoig.gov for
Improper Payment Requirements During                a complete list of all reports issued by OIG
Fiscal Year 2016 (AUD-2017-004, May 10,             since its inception. A complete list of the
2017), online at www.fhfaoig.gov/Reports/           recommendations made in all OIG reports is
AuditsAndEvaluations.)                              provided in Appendix B.



                                 Report                                            Date
 FHFA’s Examination Program for the FHLBanks’ Internal Audit
 Functions Was Adequately Designed and Executed (AUD-2017-                     May 5, 2017
 003)
 FHFA Complied with Applicable Improper Payment Requirements
 During Fiscal Year 2016 (AUD-2017-004)                                       May 10, 2017
 FHFA’s Processes for General Support System Component
 Inventory Need Improvement (AUD-2017-005)                                    May 25, 2017
 Closure of OIG Review of FHFA’s Supervision of an Enterprise’s
 Remediation of Matters Requiring Attention (ESR-2017-005)                   June 12, 2017
 NPL Sales: Additional Controls Would Increase Compliance with
 FHFA’s Sales Requirements (AUD-2017-006)                                     July 24, 2017
 FHFA’s Compliance with its Documentary Standards for Issuing
 Housing Finance Examiner Commissions (COM-2017-004)                          July 25, 2017
 FHFA Should Improve its Administration of the Suspended
 Counterparty Program (COM-2017-005)                                          July 31, 2017
 The Gap in FHFA’s Quality Control Review Program Increases the
 Risk of Inaccurate Conclusions in its Reports of Examination of            August 17, 2017
 Fannie Mae and Freddie Mac (EVL-2017-006)
 Existing Statutory Capital Requirements for Fannie Mae and
 Freddie Mac (WPR-2017-001)                                                 August 17, 2017
 Performance Audit of the Federal Housing Finance Agency’s (FHFA)
 Privacy Program (AUD-2017-007)                                             August 30, 2017




28    Federal Housing Finance Agency Offce of Inspector General
                             Report                                            Date
Fannie Mae and Freddie Mac in the Multifamily Market
 (WPR-2017-002)                                                        September 7, 2017
Compliance Review of FHFA’s Revised Process for Reviewing the             September 19,
Enterprises’ Annual Operating Budgets (COM-2017-006)                          2017
FHFA’s 2015 Report of Examination to Fannie Mae Failed to
Follow FHFA’s Standards Because it Reported on an Incomplete              September 22,
Targeted Examination of the Enterprise’s New Representation and               2017
Warranty Framework (AUD-2017-008)
FHFA’s 2015 and 2016 Supervisory Activities, as Planned,
Addressed Identifed Risks with Freddie Mac’s New Representation           September 22,
and Warranty Framework (AUD-2017-009)                                         2017
Management Alert: Need for Increased Oversight by FHFA, as
Conservator, to Ensure that Freddie Mac’s Policies and Procedures
for Resolution of Executive Offcer Conficts of Interest Align with        September 27,
the Responsibilities of the Nominating and Governance Committee               2017
of the Freddie Mac Board of Directors (OIG-2017-005)
FHFA Failed to Complete Non-MRA Supervisory Activities Related
to Cybersecurity Risks at Fannie Mae Planned for the 2016                 September 27,
Examination Cycle (AUD-2017-010)                                              2017
FHFA Did Not Complete All Planned Supervisory Activities Related
to Cybersecurity Risks at Freddie Mac for the 2016 Examination            September 27,
Cycle (AUD-2017-011)                                                          2017
Special Report: Update on FHFA’s Oversight of Fannie Mae’s Build-
Out of its Newly Leased Class A Offce Space in Midtown Center             September 28,
(COM-2017-007)                                                                2017




                    Semiannual Report to the Congress • April 1, 2017–September 30, 2017   29
Oversight Through OIG’s Investigations
OIG is vested with statutory law enforcement         and analysis of mortgage loan files and bank
authority that is exercised by its Office of         documents necessary to spot indications of
Investigations. OI conducts criminal and civil       fraud. Fraudulent loan modification schemes
investigations into those, whether inside or         sometimes involve hundreds of victims.
outside of government, who waste, steal, or          Those investigations require comprehensive
abuse government monies in connection with           document and financial records reviews,
programs and operations of the Agency and            victim interviews, and the tracking of illicitly
the GSEs.                                            received fees charged by the perpetrators.
                                                     In condominium or builder bailout scheme
Depending on the type of misconduct                  investigations, SAs carefully examine
uncovered, OI investigations may result in           mortgage and bank documents to determine
criminal charges, civil complaints, and/or           fraudulent patterns of behavior, including
administrative sanctions and decisions. Civil        undisclosed incentives to attract buyers to
claims can lead to settlements or verdicts           purchase and invest in properties. In these
with restitutions, fines, penalties, forfeitures,    investigations, SAs locate and interview
assessments, and exclusion of individuals            investors, learn the nuances of how the
or entities from participation in federal            scheme is organized, and determine how
programs. Criminal charges filed against             the perpetrators financially benefitted. In
individuals or entities may result in plea           bankruptcy or foreclosure-delay schemes,
agreements or trials, incarceration, restitution,    SAs cull through documents received by the
fines, and penalties.                                Enterprises and the FHLBanks, calculate
                                                     scheme losses, and coordinate with United
                    65                               States Trustee Offices to determine if
                                                                     Criminal
                                                     fraudulent paperwork         Sentencings
                                                                            has been submitted to
             Defendants                                       April 1, 2017  to  September
                                                     initiate a bankruptcy. Other labor-intensive30, 2017



                                                                           65
                                                     investigations conducted by SAs include
                   227                               REO, multifamily, and adverse possession
                                                     schemes. Each of these schemes presents
           Years in Prison                           with unique circumstances and requires many
                                                     hours of intense document analysis, potential
OI is staffed with special agents (SAs),                              DEFENDANTS
                                                     victim and witness interviews, and other
investigative counsels, analysts, and attorney                       collectively sentenced to
                                                     investigative techniques.




                                                                       227
advisors. OIG’s SAs investigate criminal
matters involving allegations of fraud and           To increase OIG’s effectiveness, four of
misconduct.                                          OIG’s attorney-investigators have been
                                                     appointed as Special Assistant U.S. Attorneys
Various elements contribute to determining           in several judicial districts throughout the
the resources needed for each investigation                        YEARS IN PRISON
                                                     country. They have been assigned criminal
and the length of time necessary to complete         matters arising from OI’s investigations in
each investigation. For example, loan                the districts where they have been appointed
origination and short sale schemes—                  and have pursued these investigations to
common types of mortgage fraud—can be                conviction and sentencing.
labor intensive due to the extensive review



30     Federal Housing Finance Agency Offce of Inspector General
To maximize criminal and civil law                                                         Since its inception, OIG has also maintained a
enforcement, OI works closely with other                                                   hotline to provide easy access for individuals
law enforcement agencies, including the                                                    to report tips, complaints, or referrals (TCRs)
Department of Justice (DOJ), the Federal                                                   of alleged violations of criminal and civil
Bureau of Investigation (FBI), the Department                                              laws in connection with programs and
of Housing and Urban Development Office                                                    operations of the Agency. OI is responsible
of Inspector General (HUD-OIG), Internal                                                   for conducting a preliminary review of all
Revenue Service-Criminal Investigation                                                     hotline TCRs. OIG’s hotline is staffed by a
(IRS-CI), and state and local law enforcement                                              third-party vendor to protect the anonymity
entities nationwide.                                                                       of the callers and to provide easy access
                                                                                           for reporting. Every TCR, whether made
Figure 2 OI Monetary Results from April 1,
Figure 2. OI Monetary Results from April 1, 2017,
                                                                                           by telephone directly to the hotline, email,
2017,
ThroughThrough
          SeptemberSeptember
                    30, 2017      30, 2017                                                 website, or in person, is sent to the hotline and
                         CRIMINAL                        CIVIL                             logged by the hotline. Attorneys in OI conduct
                         INVESTIGATIONS                  INVESTIGATIONS                    a preliminary assessment to determine
    Finesa                     $12,430,848                                   $-            whether further review and investigation is
    Settlements                              $-                  $5,000,000
                                                                                           appropriate. During this reporting period, 576
    Restitutions               $32,397,583                                   $-
                                                                                           discrete contacts to the hotline were made
    Total                      $44,828,431                       $5,000,000
                                                                                           involving TCRs, and 134 separate TCRs were
a
 Fines include criminal fnes, forfeiture and special                                       logged by the hotline.
assessments, and civil fnes imposed by federal court

                                                                                           During the semiannual reporting period, OI
Figure 3 Reports, Referrals, Prosecutions,
and Convictions from April 1, 2017, Through
                                                                                           conducted numerous criminal, civil, and
Figure 3. Reports, Referrals,
September       30,Through
                              Prosecutions, and Convictions
                    2017aSeptember 30, 2017a                                               administrative investigations, which resulted
from April 1, 2017,
                                                                                           in the filing of criminal charges against 52
    Investigative Reportsb                                                     33
    Criminal Referrals to DOJ                                                  68
                                                                                           individuals, the conviction of 56 individuals,
    Criminal Referrals to State and Local
                                                                                           and 65 sentencings, as well as court-ordered
                                                                               20
    Prosecuting Authorities                                                                fines and restitution awards.
    Indictments and Informations During
    the Reporting Period That Resulted
    from Referral to Prosecutors During
                                                                               40          Figures 2 and 3 summarize the results
    Prior Reporting Periods                                                                obtained during this reporting period from our
    Total Number of Indictments and                                                        investigative efforts.
    Informations During the Reporting                                          52
    Period Resulting from OIG Referrals
    Trials; Number of Defendants                                             7; 13         Below, we discuss some of our civil and
    Convictions/Pleas                                                          56          criminal cases. For ease of review, we group
    Sentencings                                                                65          our criminal investigations during this
aaAll
 Allcriminal  charges and successive actions (pleas/convictions/sentencings)
       criminal    charges and successive actions (pleas/                                  period into the categories described below.
 are supported with documents filed with the corresponding federal or state
convictions/sentencings)
 court. This includes both public andare    supported
                                       non-public    documentswith   documents
                                                                 (sealed). All referrals   In each category, we describe the nature of
 made to DOJ and to state prosecutors are captured within each investigative
fled     with  the   corresponding        federal      or  state    court
 file; these actions are tabulated via a statistical report run in OIG’s case
                                                                             This          the crime and include a few highlights of
includes
 management
 and entities.
              both    public
                 system.       and
                         Criminal     non-public
                                  referrals            documents
                                            on this chart               (sealed)
                                                           include both individuals        matters investigated by OIG. For a summary
All referrals made to DOJ and to state prosecutors are
bFor the purposes of this SAR, an investigative report is defined as the Report of         of publicly reportable investigative outcomes
captured
 Investigationwithin
              finalized each    investigative      fle; these       actions
                        at the conclusion of the investigation,
are tabulated via a statistical report run in OIG’s case
                                                                prior to case closure.
                                                                                           for each category during this reporting period,
management system Criminal referrals on this chart                                         see Appendices E–M.
include both individuals and entities
b
 For the purposes of this SAR, an investigative report is
defned as the Report of Investigation fnalized at the
conclusion of the investigation, prior to case closure



                                           Semiannual Report to the Congress • April 1, 2017–September 30, 2017                         31
Investigations: Civil Cases                         knew they misrepresented key characteristics
                                                    of the loans, including compliance with
During the semiannual reporting period, OI          lending guidelines, borrowers’ ability to pay,
continued to actively participate in residential    borrowers’ fraud, and appraisal accuracy.
mortgage-backed securities (RMBS)
investigations by working closely with U.S.         The complaint further asserted that offering
Attorneys’ offices to investigate allegations       documents falsely represented that DB
of fraud committed by financial institutions        Home had developed internal underwriting
and individuals in connection with RMBS.            guidelines that it believed generated quality
OI SAs and attorneys reviewed evidence              loans and that DB Home had instituted a
produced by various parties, conducted              quality control process that monitored loan
witness interviews, provided strategic              production with the overall goal of improving
litigation advice, and briefed other law            the quality of loan production, among
enforcement agencies on the operations of the       numerous other representations designed
RMBS market.                                        to instill in investors trust in DB Home’s
                                                    underwriting processes. The complaint
Civil Complaint Filed Against Former                alleged that Mangione knew that these
Deutsche Bank Head of Subprime                      statements were false.
Mortgage Trading
                                                    Freddie Mac was an investor in the securities.
On September 11, 2017, a civil complaint
was filed against Paul Mangione, former             $2.5 Million Bank of America Settlement for
Deutsche Bank head of subprime trading. The         Trading Ahead in Swaps Desk Scheme, NC
complaint alleges that Mangione engaged
in a fraudulent scheme to misrepresent the          On September 22, 2017, DOJ announced
characteristics of loans backing two RMBS           that a settlement was reached with Bank
that Deutsche Bank sold to investors that           of America to resolve the United States’
resulted in hundreds of millions of dollars         investigation of certain trading activity
in losses. This suit is brought pursuant to         by Bank of America’s New York “Swaps
the Financial Institutions Reform, Recovery,        Desk” involving trading ahead of block
and Enforcement Act of 1989 (FIRREA) and            futures trades with its counterparties and
seeks an appropriate civil penalty.                 then obstructing the CME Group Inc. (CME)
                                                    investigation of the trading. As part of the
As alleged in the complaint, Mangione               settlement, Bank of America agreed to pay
engaged in a fraudulent scheme to sell $1.4         $2.5 million, to report certain suspected
billion in securities by misleading investors       misconduct to the United States, and to
about the quality of the loans backing the          improve and enhance Bank of America’s
securitizations. The complaint further              compliance risk management program.
alleges that Mangione misled investors
about the origination practices of Deutsche         According to the Statement of Facts
Bank’s wholly-owned subsidiary, DB Home             admitted to by Bank of America as part of
Lending LLC (DB Home) (formerly known               the settlement, at least three former traders
as Chapel Funding, LLC), which was the              on its New York Swaps Desk eavesdropped
primary originator of loans included in             on calls between certain large financial
the deals. Mangione approved offering               institution counterparties and Bank of
documents for the securities even though he         America salespersons about block futures



32    Federal Housing Finance Agency Offce of Inspector General
trades without announcing their presence           Investigations: Criminal Cases
and then used information obtained by
eavesdropping to enter into transactions to        Below we highlight OIG criminal
hedge Bank of America’s expected risk from         investigations during this semiannual
those block futures trades. This practice was      reporting period in a number of different
referred to as, among other things, “pre-          categories that resulted in criminal
hedging.” Internally at Bank of America, and       indictments, convictions, plea agreements,
during the investigation, the traders promoted     sentencings, and court-ordered fines and
the explanation that any appearance of pre-        restitution judgments.
hedging resulted from inaccurate timestamps.
                                                   Condo Conversion and Builder Bailout
Bank of America submitted a letter to the          Schemes
CME falsely stating that the traders “did
not have advance knowledge of a block              In these types of schemes, the sellers
trade such as to enable them to engage in          or developers wrongfully conceal from
any trading prior to the execution of the          prospective lenders the incentives they’ve
block.” After learning of the government’s         offered to investors and the true value of
investigation, Bank of America retracted its       the properties. The lenders, acting on this
letter and informed the CME that the traders       misinformation, make loans that are far riskier
had traded ahead of block futures trades. A        than they have been led to believe. Such loans
FHFA regulated entity executed block futures       often default and go into foreclosure, causing
through the Swaps Desk while the fraudulent        the lenders to suffer large losses.
activity was occurring.
                                                   Below we summarize two OIG investigations
PHH Ordered to Pay $74 Million for                 in this category that resulted in an indictment,
Alleged Mortgage Lending Violations                plea agreements, sentencings, and court
                                                   ordered restitution and forfeiture during this
On August 8, 2017, DOJ announced that              semiannual reporting period. (See Appendix
PHH Corp., PHH Mortgage Corp., and PHH             E for a summary of publicly reportable
Home Loans (collectively, PHH) agreed to           investigative outcomes in this category.)
pay the United States $74 million to resolve
allegations that they violated the False Claims    Guilty Pleas of Real Estate Professional
Act by knowingly originating and underwriting      and Mortgage Company Manager and
mortgage loans insured by federal programs         Indictment of Straw Buyer in Condominium
and purchased by the Enterprises.                  Conversion Fraud Scheme, Florida

The settlement resolved allegations that PHH       Between May and June 2017, Carlos Escarria
failed to comply with certain origination,         and Alejandro Tobon each pled guilty to
underwriting, and quality control requirements     conspiracy to commit bank and wire fraud,
of the Enterprises, as well as the government’s    and Joaquin Cadavid was indicted on charges
contention that PHH originated and sold loans      of conspiracy to commit bank fraud, bank
to the Enterprises from at least 2009 to 2013      fraud, and wire fraud affecting a financial
that did not meet their requirements.              institution for their roles in a condominium
                                                   conversion fraud scheme.
As part of the Settlement Agreement, the
Enterprises will receive over $2.5 million.



                        Semiannual Report to the Congress • April 1, 2017–September 30, 2017    33
Escarria, a real estate sales associate,            from approximately 1,400 investors by
and Tobon, a branch manager, worked at              promising to develop dilapidated properties
Transcontinental Lending Group, a company           into luxury resorts. Cay Clubs Resorts
that originated mortgage loans. Escarria,           incentivized investors by promising an
Tobon, and others marketed and sold                 upfront “leaseback” payment of 15–20% of
condominiums at The Preserves at Temple             the unit sales price at the time of closing.
Terrace (The Preserves), a condominium              These incentives were concealed from the
conversion project in Tampa, Florida.               lenders and the Enterprises.
As part of their marketing strategy, Escarria,
Tobon, and other co-conspirators offered            As the Cay Clubs enterprise experienced
incentives to potential buyers, including cash      financial difficulties, Schwarz conspired with
back payments, down payment assistance, and         others at Cay Clubs to recruit insiders as straw
payments of their mortgage and homeowners’          buyers to obtain mortgages on Cay Clubs
association dues. The incentives provided           condominiums. The loan proceeds were then
to the borrowers were not disclosed to the          diverted to the failing Cay Clubs company and
lenders. Escarria also prepared and submitted       to pay out investor leaseback payments.
to potential lenders loan applications that
contained material misrepresentations               Ross Pickard was a senior loan officer at
regarding the buyers’ income and source of          JPMorgan Chase Bank. He conspired with
the down payment funds, among others.               others in a scheme to defraud the bank
                                                    by completing, certifying, and submitting
Cadavid, a straw buyer, acting in concert with      mortgage loan applications for Cay Club
Escarria, Tobon, and other co-conspirators,         condominiums on behalf of borrowers that
allegedly submitted loan applications to            contained false and fraudulent statements.
acquire eight condominiums at The Preserves.        The false statements included, but were not
Cadavid knew the loan applications contained        limited to, false occupancy, overinflated
materially false misrepresentations and             income and assets, as well as the understated
omissions, including the source of the down         liabilities. By relying on Pickard’s false
payment and income, as well as the fact that        and fraudulent statements on the loan
the lenders were unaware he was receiving           applications, JPMorgan Chase was induced
cash back for each unit he acquired. Losses         into funding mortgage loans for otherwise
associated with Cadavid’s transactions are          unqualified borrowers.
estimated at approximately $1 million; overall
scheme loss calculations are ongoing.               In May 2017, Schwarz was sentenced to
                                                    480 months in prison, 5 years of supervised
40-Year Prison Sentence, More than $180             release, and ordered forfeiture of cash and
Million Forfeiture Order for Former                 real property of $304,439,754. An amended
CFO of Resort Development; JPMorgan                 restitution order was filed during July
Chase Bank Former Senior Loan Officer               2017, ordering Schwarz’s total restitution
Sentenced, Florida                                  of $181,445,179. Both the forfeiture and
                                                    restitution were ordered jointly and severally
David Schwarz was the former CFO and                with co-conspirators.
partial owner of the Cay Clubs Resorts,
which marketed vacation rental units for            In August 2017, Pickard was sentenced to 36
17 locations in Florida, Las Vegas, and the         months in prison, 36 months of supervised
Caribbean and raised more than $300 million         release, and ordered to pay $33,330,503 in



34    Federal Housing Finance Agency Offce of Inspector General
restitution and $470,484 in forfeiture for his       documents, wire transfer documents, and
role in this scheme, which caused losses to          title insurance documents, all of which
Fannie Mae and Freddie Mac of more than              were purportedly witnessed or reviewed by
$11 million dollars.                                 parties and professionals who, in fact, either
                                                     did not exist or had no knowledge of the
Loan Origination Schemes                             transactions. By creating the illusion of a
                                                     legitimate transaction, unsuspecting lenders
Loan or mortgage origination schemes are the         were deceived into disbursing loan proceeds
most common type of mortgage fraud. They             to a bank account opened in the name of a
typically involve falsifying borrowers’ income,      fraudulent title company or fictitious law
assets, employment histories, and credit profiles    firm. The loan proceeds were then withdrawn
to make them more attractive to lenders.             by co-conspirators who made repeated
Perpetrators often employ bogus Social Security      fraudulent withdrawals at multiple ATMs
numbers and fake or altered documents such as        and bank branches.
W-2s and bank statements to cause lenders to
make loans they would not otherwise make.            The owners of the homes connected to the
                                                     loans were never parties to the transactions,
Below we summarize four OIG investigations           and with respect to the mortgage loans, none
in this category that resulted in indictments,       of the homes were actually sold. The co-
a plea agreement, sentencings, and court-            conspirators established virtual offices to
ordered restitution during this semiannual           maintain the appearance that all necessary
reporting period. (See Appendix F for a              parties were actively involved in legitimate
summary of publicly reportable investigative         lending transactions.
outcomes in this category.)
                                                     At least seven properties are involved in
10-Year Prison Sentence and Guilty Plea in           this scheme with overall losses of more than
Loan Origination Fraud Scheme, New Jersey            $900,000. In a related case, during April
                                                     2017, Melissa Phillip pled guilty to financial
Between August and September 2017, Artis             facilitation of criminal activity for her role in
Hunter was sentenced to 10 years in prison,          this scheme.
and Laquan Jones was sentenced to 5 years
of probation and ordered to pay $6,000 in            Licensed Real Estate Agent/Loan Broker
restitution for their roles in a loan origination/   Sentenced, Ordered to Pay More than $2
money laundering scheme.                             Million, California

Hunter and co-conspirators defrauded                 On April 17, 2017, Lynn Maina was
numerous lenders by using stolen identities          sentenced to 4 months in prison, 36 months
to create the hallmarks of a legitimate              of supervised release, and ordered to pay
residential mortgage or home equity line of          $2,246,600 in restitution for her role in a loan
credit (HELOC) transaction, replete with             origination conspiracy scheme.
a borrower/buyer, seller, title company,
homeowner’s insurance company, closing               Maina was employed by Affiliated Financial
attorney, and other parties. (A HELOC is a           Services (AFS) as a licensed real estate
line of credit that uses the borrower’s home         agent brokering mortgage loans. Maina and
as collateral.) The loan applications contained      co-conspirators prepared and submitted to
many falsified documents, including closing          mortgage lenders several false documents,



                         Semiannual Report to the Congress • April 1, 2017–September 30, 2017       35
including fraudulent loan applications, falsified    At the time O’Brien was obtaining the
letters that explained away problems with            fraudulent loans, she was employed as a
credit histories, and fabricated credit reports.     special assistant attorney general for the
                                                     Illinois Department of Revenue and owned
When the defrauded mortgage lenders                  O’Brien Realty, LLC. Additionally, she
realized that the documents they had                 was working part time as a loan officer at
relied on to approve loan applications had           Amronbanc Mortgage Corporation, where
false statements, they demanded that AFS             she met Bartko, a loan officer. At the time of
repurchase the mortgage loans. Instead of            indictment, O’Brien was employed as a judge
repurchasing the loans, however, Maina               with the Cook County Circuit Court in Illinois.
continued the fraud by convincing the                To date, the investigation has identified more
underlying borrowers to refinance with other         than $750,000 in losses to the Enterprises.
lenders using the same false information.
                                                     Sentencing of Loan Officer in Straw Buyer
Maina and her co-conspirators earned salaries        Scheme, Illinois
and commissions based on the fraudulent
loans that were brokered through AFS. At             On June 14, 2017, loan officer Nicholas
least five of the refinanced loans associated        Burge was sentenced to 48 months in prison,
with Maina’s scheme were owned by Freddie            two years supervised release, and ordered to
Mac. As a result of the fraud, Freddie Mac           pay $1,335,248 in restitution.
suffered losses of approximately $1 million.
                                                     Burge conspired with others to aid straw
Indictment of Attorney and Loan Officer in           buyers to fraudulently obtain at least five
Mortgage Fraud Scheme, Illinois                      mortgage loans valued at approximately
                                                     $1.5 million by making materially false
On April 11, 2017, Jessica Arong O’Brien and         representations in documents submitted to
Maria Bartko were indicted on fraud charges          lenders. Soon after the properties were sold
relating to an alleged mortgage fraud scheme.        to the straw buyers, the mortgages went into
                                                     default. The fraud resulted in an estimated
According to the indictment, O’Brien                 $800,000 loss to the Enterprises.
fraudulently caused lenders to provide
approximately $1.4 million in mortgage               Loan Modifcation and Property
and commercial loans through false                   Disposition Schemes
representations and concealing material
facts in documents submitted to the lenders,         These schemes prey on homeowners.
such as the buyer’s income, employment,              Businesses typically advertise that they can
liabilities, intent to occupy, identity, cash        secure loan modifications if the homeowners
to close, and sale price. O’Brien allegedly          pay significant upfront fees or take other
used the fraudulently obtained mortgage loan         action that enriches the defendant. Typically,
proceeds to purchase or refinance mortgages          these businesses take little or no action,
on investment properties. O’Brien then               leaving homeowners in a worse position.
allegedly obtained a commercial line of credit
to maintain the properties before selling them       Below we summarize five OIG investigations
to Bartko and a straw buyer whom O’Brien             in this category that resulted in a criminal
knew would be fraudulently qualified for             indictment, a trial conviction, plea
mortgage loans.                                      agreements, sentencings, and court-ordered



36     Federal Housing Finance Agency Offce of Inspector General
        restitution and forfeiture during this                                       According to court records and evidence
        semiannual reporting period. (See Appendix                                   presented at trial, Araya, Henderson, and
        H for a summary of publicly reportable                                       Seko operated a large-scale scam that
        investigative outcomes in this category.)                                    victimized vulnerable individuals and families
                                                                                     across the country for several years. The
        Three Found Guilty After Trial in $10                                        conspirators sent targeted mass mailers to
        Million Nationwide Loan Modification                                         homeowners facing foreclosure through
        Scheme; Sentenced to Prison Terms of up                                      Seko’s company, Seko Direct Marketing.
        to 20 Years; Restitution Ordered up to                                       The mailers referenced federal programs
        $10.2 Million, Virginia                                                      designed to help struggling homeowners
                                                                                     and were titled “Notice of Mortgage Relief,”
        On July 19, 2017, Sammy Araya, Michael                                       among other misleading titles. The mailers
        Henderson, and Jen Seko were sentenced                                       listed various toll-free telephone numbers
        to a combined 39 years in prison after                                       for the homeowners to call for assistance.
        their convictions by a federal jury for their                                When a victim homeowner called the toll-
        roles in a nationwide, multi-year mortgage                                   free number listed on the mailer, a member
        modification fraud scheme that victimized                                    of the conspiracy posing as a “customer
        hundreds of homeowners out of at least $10                                   service representative” would answer the
        million. Araya, Henderson, and Seko were                                     phone and collect financial information
        sentenced to 240 months, 144 months, and 84                                  from the victim. Henderson served as
        months in prison, respectively, and 36 months                                one of the purported “customer service
        of supervised release. Restitution hearings                                  representatives” and helped to distribute
        were held between August and September                                       the money collected by the scam, while
        2017, where each co-defendant was jointly                                    Araya was the mastermind and principal
        and severally ordered restitution, ranging                                   beneficiary of the fraudulent operation.
        from $9 to $10.2 million.




                                                                                                  Check used to purchase over
                                                                                                  $20,000 in gold coins from Araya’s
                                                                                                  Mitigation Center bank account




        Excerpts of a call script used by employees of Retention
Excerpts of a call script used by employees of Retention Division (Araya’s business) to solicit
        Division (Araya’s business) to solicit business from victims
business from victims




                                            Semiannual Report to the Congress • April 1, 2017–September 30, 2017                 37
After being contacted by another member of                                                   homes after the victims had been induced to
the conspiracy and told that their mortgage                                                  make their “trial” mortgage payments to the
modification had been approved, the victim                                                   members of the conspiracy rather than to their
homeowners would be told that their lender                                                   lenders. In addition to the millions stolen from
required a “reinstatement fee,” usually in                                                   struggling homeowners, the scheme resulted in
the amount of thousands of dollars. Victims                                                  an estimated $3.8 million in losses to financial
were also told that they were required to                                                    institutions and approximately $1.1 million in
make several “trial” mortgage modification                                                   potential losses to the Enterprises.
payments. After these so-called “trial payments”
were completed, their modification would                                                     In related cases, on June 1, 2017, Nicholas
be complete, and their new lower mortgage                                                    Estilow and Sabrina Rafo were sentenced
payment would become permanent for the life                                                  for their roles in this scheme. Estilow and
of the loan. In reality, however, the members                                                Rafo were sentenced to 80 and 60 months
of the conspiracy were simply diverting the                                                  in prison, respectively, and 3 years of
victims’ payments for their own personal                                                     supervised release. Both defendants were
benefit, without doing anything to assist in                                                 additionally ordered restitution of over $3.6
modifying the victims’ mortgages. Araya                                                      million and forfeiture of over $9.3 million,
used the proceeds of the fraud to purchase                                                   jointly and severally.
expensive vehicles, a racehorse, luxury goods,
personal travel, and a reality television show he                                            Sentencing of Loan Scheme Operator; Over
produced called “Make It Rain.TV.”                                                           500 Homeowners Victimized, California




                                                                                             Screen shot of Rasher’s YouTube video advertising
                                                                                             Screen    shot of Rasher’s YouTube Video
                                                                                             his fraud scheme.
                                                                                             advertising his fraud scheme
Screen shot of YouTube video for Araya’s “Make.itRain.TV” show with his cars and residence
Screen shot of YouTube video for Araya’s
“Make It Rain TV” show with his cars                                                         On September 29, 2017, Kevin Rasher was
and residence                                                                                sentenced to 97 months in prison, 3 years
                                                                                             of supervised release, and ordered to pay
This scheme had devastating consequences                                                     $2,240,526 in restitution relating to his
for the victim homeowners, all of whom were                                                  operation of a fraud scheme that stole millions
already in a precarious financial position.                                                  from over 500 distressed homeowners by
Many victims suffered substantially greater                                                  falsely promising that he could help them avoid
financial hardship after falling victim to this                                              foreclosure by obtaining mortgage modifications.
conspiracy than they were already facing when
they entered into the fraudulent agreements                                                  Rasher admitted that he falsely told distressed
with the conspirators. In many cases, the                                                    homeowners that he was an employee of
lenders ultimately foreclosed on the victims’                                                the government or that he was an attorney,



38           Federal Housing Finance Agency Offce of Inspector General
and that the homeowners had been approved          This scheme to defraud distressed
for a reduced mortgage payment or interest         homeowners and the Enterprises has impacted
rate. Rasher then instructed the homeowners        over 10,000 victims nationwide.
to mail their mortgage payments to one of his
businesses, claiming that he would forward         Trial Conviction in Foreclosure Rescue
the money to the homeowners’ mortgage              Fraud Scheme, Maryland
lenders. Instead of forwarding the money to the
mortgage lenders, Rasher deposited the money       On June 23, 2017, a federal jury convicted
into his bank accounts and used it for his own     Ana Gomez on charges of mail fraud and
personal expenses. Included in the overall         conspiracy to commit mail and wire fraud for
scheme were loans owned by the Enterprises.        her role in a foreclosure rescue fraud scheme.

Sentencing of Co-Owner and Guilty Pleas            Gomez and her co-conspirators claimed they
of Co-Owner and Operator in Nationwide             could help homeowners who wanted to modify
Loan Modification Scheme with Over                 their mortgage loans, including loans owned by
10,000 Victims, Utah                               the Enterprises, and prevent foreclosure of their
                                                   homes. The co-conspirators sold the victims on
Chad Gettel and others operated CC Brown           a “principal reduction” program that included
Law LLC (CC Brown), a purported loan               an upfront fee and monthly payments for 10
modification services and processing               to 15 years. Gomez and her co-conspirators
business. Gettel, along with others, was aware     directed victims to make monthly payments to
of and approved the false representations          them and to companies they controlled, in lieu
and promises used in the company’s mailed          of to their lenders.
marketing materials and sales telemarketing
calls, including that CC Brown was a national      The co-conspirators mailed monthly invoices
law firm with a 90% success rate in obtaining      to most of their victims that falsely indicated
loan modifications, that a formal board of         that the “principal balance” was being paid
attorneys reviewed and approved all client         down. Some of the victims paid Gomez in
information prior to acceptance, and that the      person each month at her residence while
modification process would take an average         others deposited their payments directly into
of four months. Gettel admitted he knew            bank accounts controlled by Gomez’s co-
this information was false, yet allowed CC         conspirators. Victims were discouraged from
Brown employees to assert these claims to          opening mail received from their lenders and
prospective customers.                             instead were asked to provide these documents
                                                   to the co-conspirators. No attempts were made
On August 3, 2017, Chad Gettel was                 by the co-conspirators to negotiate with lenders
sentenced to 84 months in prison, 3 years          on behalf of the victims, many of whom lost
of supervised release, and ordered to pay          their homes. Overall scheme losses, including
$590,129 in restitution, jointly and severally,    payments made by victims, are estimated
for his role in this scheme.                       between $1 to $2 million.

In related cases, during May 2017, John McCall     Indictment in $7 Million Foreclosure-
pled guilty to conspiracy to commit wire fraud     Avoidance Scam, California
and money laundering, and Sheridan Black pled
guilty to conspiracy and was sentenced to 24       On June 8, 2017, Michael “Mickey” Henschel
months’ court-supervised probation.                was indicted on charges of conspiracy,



                        Semiannual Report to the Congress • April 1, 2017–September 30, 2017    39
bankruptcy fraud, and wire fraud for his role       misrepresents or fails to disclose material facts
as the alleged mastermind of a foreclosure-         to induce a lender to agree to a short sale.
avoidance scam that targeted distressed
homeowners and defrauded victims of more            Below we summarize three OIG
than $7 million.                                    investigations in this category that resulted in
                                                    criminal indictments, sentencings, and court-
According to the indictment, Henschel and           ordered restitution and forfeiture during this
co-conspirators marketed illegal foreclosure        semiannual reporting period. (See Appendix
and eviction-delay services to homeowners           G for a summary of publicly reportable
who had defaulted on their mortgages and to         investigative outcomes in this category.)
renters who were facing eviction. As part of
the scheme, Henschel and others allegedly           Three Charged in a Buy-and-Bail Short
convinced homeowners to sign fake grant             Sale Scheme, Michigan
deeds that purported to show the homeowners
had conveyed an interest in their property          On August 29, 2017, William Elias and
to fictional third parties. Henschel and his        two employees of Elias Realty, Kimberly
co-conspirators allegedly filed bankruptcies        Doren and Daniel Trubak, were indicted
in the names of fictional persons and entities      on charges including conspiracy to commit
to trigger the automatic stay provision of          bank fraud and falsification of records. Elias
the Bankruptcy Code, which meant that               and Doren were charged with additional
foreclosure sales were stalled. Henschel            violations, including bank fraud, conspiracy
allegedly delayed evictions in a similar way,       to commit money laundering, and money
filing fraudulent documents in state eviction       laundering. Elias, Doren, and Trubak
actions and sending similar documents to            allegedly operated a buy-and-bail scheme
sheriff’s offices.                                  through Elias Realty. Through extensive
                                                    advertising, the co-conspirators contacted
The indictment also alleged that Henschel           struggling homeowners and promised to help
charged some homeowners large fees before           the homeowners sell their homes, eliminate
agreeing to clear title to their properties,        their debt, and buy new homes. The co-
in addition to the monthly fees paid for            conspirators advised the homeowners to buy
the illegal services. Henschel and his co-          a second home and facilitated the submission
conspirators collected more than $7 million         of mortgage applications. Allegedly, the
dollars from victims during this scheme.            mortgage applications for the second homes
Preliminary loss calculations associated with       falsely inflated the values of the first homes
mortgages owned by the Enterprises are in           and misrepresented that the borrowers
excess of $800,000 and are anticipated to           intended to keep their existing homes as
increase substantially.                             rental properties. In reality, however, the
                                                    homes were worth significantly less than
Short Sale Schemes                                  stated in the mortgage applications, and the
                                                    homeowners had no intention of renting their
Short sales occur when a lender allows a            homes; rather, they intended to sell them by
borrower who is “underwater” on his/her             short sale.
loan—that is, the borrower owes more than
the property is worth—to sell his/her property      Once the second homes were purchased,
for less than the debt owed. Short sale fraud       the co-conspirators allegedly instructed
usually involves a borrower who intentionally       the homeowners to stop making mortgage



40    Federal Housing Finance Agency Offce of Inspector General
payments on the first homes and assisted           Sentencings in Complex Short Sale Fraud
the homeowners with short sale applications        Scheme, California
submitted to their lenders for their original
properties given the financial hardships           During July 2017, Eric Wolfe was sentenced
due to having two active mortgages. Many           to 200 months in prison, and Brian Deden
homeowners were permitted to conduct short         was sentenced to 24 months in prison for
sales, and lenders forgave the difference          their respective roles in a short sale fraud
between the short sale prices and the              scheme. Defendant Wolfe was also ordered
outstanding amount of the loans. In some           to pay over $140,000 in restitution and
instances, however, the financial institutions     $500,000 in forfeiture.
did not agree to the short sales, and the
mortgages were foreclosed. Losses to the           An OIG investigation found evidence of a
Enterprises are more than $4 million.              wide-ranging conspiracy in which numerous
                                                   conspirators engaged in several schemes
Sentencing of Buyer in Short Sale Fraud            to fraudulently obtain money: a “flopping”
Scheme, California                                 scheme where banks were convinced to
                                                   accept short sale prices that were lower
During August 2017, Mahendra Prasad                than a legitimate buyer would be willing to
was sentenced to 15 months in prison, 5            pay; recording false second and third liens;
years of supervised release, and ordered           tricking distressed homeowners into signing
to pay $328,000 in restitution, jointly and        their properties over to the conspirators,
severally, and $328,000 in forfeiture for his      and renting distressed properties while
participation in a short-sale fraud scheme.        simultaneously stalling foreclosure through
                                                   the use of fraudulent documents. The
Prasad and co-conspirators submitted               Enterprises, as owners of the mortgages on at
loan applications containing material              least eight of the properties, suffered losses.
misstatements to purchase properties. The
applications included false statements             Property Management and REO Schemes
concerning employment, income, and the
buyers’ intent to occupy the properties as         Numerous foreclosures left the Enterprises
their primary residence. Instead of residing       with an inventory of real estate owned
in the properties, the co-conspirators rented      (REO) properties. The REO inventory has
the properties and collected rental payments.      sparked a number of different schemes to
Later, the co-conspirators engaged in              either defraud the Enterprises, which use
fraudulent short sale transactions by              contractors to secure, maintain and repair,
submitting false documentation to lenders,         price, and ultimately sell their properties, or
including fraudulently signed arm’s length         defraud individuals seeking to purchase REO
affidavits claiming no relationship to the         properties from the Enterprises.
buyers, when in fact the buyers were
co-conspirators.                                   Below we summarize an OIG investigation
                                                   in this category that resulted in sentencings
This short sale fraud scheme involved at least     and court-ordered forfeiture during this
25 properties, some of which were owned by         semiannual reporting period. (See Appendix
the Enterprises, and caused losses of at least     I for a summary of publicly reportable
$3 million.                                        investigative outcomes in this category.)




                        Semiannual Report to the Congress • April 1, 2017–September 30, 2017    41
Four Licensed Real Estate Agent Family                Below we summarize an OIG investigation in
Members Sentenced in REO Scheme, Arizona              this category that resulted in sentencings during
                                                      this semiannual reporting period. (See Appendix
On September 7, 2017, Daphne Iatridis and             J for a summary of publicly reportable
Arthur Telles, husband and wife, along with           investigative outcomes in this category.)
her sons Brendyn and Spenser Iatridis, were
sentenced for their roles in a fraud scheme           Sovereign Citizens Sentenced in Adverse
involving the sale of foreclosed properties. Prison   Possession Scheme, Illinois
sentences ranged from 10 to 30 months, with
each defendant additionally receiving probation       Between May and September 2017, David Farr
or supervised release. Daphne Iatridis and Telles     and Torrez Moore were sentenced to 14 years
were further ordered to forfeit 26 properties.        and 11 years in prison, respectively, for their
                                                      roles in an adverse possession scheme. Farr was
Iatridis, a licensed real estate agent, was           additionally sentenced to 3 years of probation.
approved by Fannie Mae to list real estate
properties it owned as a result of foreclosure.       Farr, Moore, and others falsely asserted
Daphne Iatridis, Telles, and her sons Brendyn         ownership of foreclosed or vacant properties
and Spenser Iatridis (also real estate agents),       owned by Fannie Mae or lenders and either
used trusts and the stolen identities of family       moved into the property themselves, or
members and others to purchase Fannie Mae             rented the home to a third party and acted as
properties listed by Daphne Iatridis, which           a landlord. On multiple occasions, the co-
is in violation of Fannie Mae rules. The co-          conspirators unlawfully entered the properties,
conspirators profited from the scheme in many         changed the locks, and filed fraudulent
ways, including purchasing the REO properties         documents with the county recorder’s officer to
at a discounted price, earning commissions            verify their alleged ownership of the properties.
on the purchase and sale of the properties,
overcharging Fannie Mae for maintenance               The co-conspirators identified themselves as
and expenses, and renting the properties. The         “Moors,” one segment of a sovereign citizens
co-conspirators spent over $1.3 million to            group that claims not to be subject to the
purchase 28 Fannie Mae REO properties.                government’s jurisdiction.

Adverse Possession and Distressed                     RMBS Schemes
Property Schemes
                                                      In this type of scheme, traders fraudulently
Adverse possession schemes use illegal                manipulate the buying and selling prices of
adverse possession (also known as “home               RMBS, causing customers to pay more to
squatting”) or fraudulent documentation               purchase the RMBS and to receive less when
to control distressed homes, foreclosed               they sell RMBS.
homes, and REO properties. In distressed
property schemes, perpetrators falsely                Below we summarize an OIG investigation in
purport to assist struggling homeowners               this category that resulted in a guilty verdict
seeking to delay or avoid foreclosure.                at trial and a plea agreement during this
They use fraudulent tactics, such as filing           semiannual reporting period. (See Appendix
false bankruptcy petitions, while collecting          K for a summary of publicly reportable
significant fees from the homeowners.                 investigative outcomes in this category.)




42     Federal Housing Finance Agency Offce of Inspector General
Guilty Trial Verdict and Guilty Plea of             multifamily properties. Multifamily properties
Former Nomura Securities Traders,                   have five or more units and are primarily
Connecticut                                         rental apartment communities.

                                                    Below we summarize an OIG investigation
                                                    in this category that resulted in a sentencing
                                                    and court-ordered restitution during this
                                                    semiannual reporting period. (See Appendix
                                                    L for a summary of publicly reportable
                                                    investigative outcomes in this category.)

                                                    Sentencing in Embezzlement
                                                    Scheme, Arizona

                                                    On September 11, 2017, Shana Johnson was
Photo trial exhibit of Nomura Trading Floor.
Photo   trial exhibit of Nomura Trading Floor       sentenced to 44 months in prison, 3 years of
                                                    supervised release, and ordered to pay over
On June 15, 2017, Michael Gramins was               $2.1 million in restitution associated with an
found guilty at trial of conspiracy to commit       embezzlement scheme.
securities fraud and wire fraud.
Gramins was an executive director on                Johnson worked as an accountant for
the RMBS Desk at Nomura Securities                  a property management company in
International (Nomura). He engaged in a             Arizona. She embezzled over $2.4 million
conspiracy to defraud customers of Nomura           from bank accounts associated with properties
by fraudulently inflating the purchase price at     managed by her employer, including four
which Nomura could buy an RMBS bond to              multifamily properties financed by Freddie
induce their victim-customers to pay a higher       Mac. Johnson stole the money from the
price for the bond. Gramins also fraudulently       accounts, including Freddie Mac custodial
deflated the price at which Nomura could            accounts, by using the company’s accounts to
sell an RMBS bond to induce their victim-           issue approximately 450 fraudulent checks,
customers to sell bonds at cheaper prices,          totaling over $1.4 million, to a relative.
causing Nomura to profit illegally. Gramins         Johnson also caused the company to initiate
trained subordinates to lie to customers,           nearly $1 million in unauthorized electronic
provided them with language to use in               transfers to pay for personal expenses
deceiving customers, and encouraged them to         including her purchase of two cars. To hide
engage in the practice.                             her theft, she falsified journal entries, bank
                                                    statements, bank reconciliation reports, and
In a related case, on April 4, 2017, Frank          financial statements. Johnson was fired after
Dinucci was charged and pled guilty to              her employer discovered the fraud.
conspiracy to commit securities and wire fraud.
                                                    Johnson then relocated to Georgia, where
Multifamily Schemes                                 she became employed in a similar capacity
                                                    with yet another property management
Investigations in this category involve a           company, and resumed her fraudulent activity.
variety of fraud schemes that relate to loans       Once again, Johnson embezzled at least an
purchased by the Enterprises to finance             additional $482,960.



                         Semiannual Report to the Congress • April 1, 2017–September 30, 2017    43
                                                                                                 BOSTON

                                                                                          NEW YORK

                                                                            CHICAGO
                                                    DES MOINES                               PITTSBURGH

                                                                 INDIANAPOLIS         CINCINNATI
                    SAN FRANCISCO
                                                    TOPEKA




                                                                                       ATLANTA




                                                     DALLAS




                                    Map of the 11 FHLBank Districts


Fraud Affecting the Enterprises, the                 FHLBank of Dallas is part of the FHLBank
FHLBanks, or FHLBank Member Institutions             system, created to support mortgage lending
                                                     and related community investment.
Investigations in this category include a variety
of schemes involving Fannie Mae, Freddie Mac,        The indictment alleges that Smith, Parker,
the FHLBanks, or members of FHLBanks.                and Sims submitted a series of fraudulent
                                                     reimbursement requests for personal travel
Below we summarize three OIG investigations          that they identified as business-related, causing
in this category that resulted in criminal           the bank to pay approximately $780,000.
indictments, a plea agreement, sentencings,          The defendants incurred these expenses in
and court-ordered restitution during this            connection with first class airfare, limousine
semiannual reporting period. (See Appendix           services, concerts, vineyard tours, luxury hotel
M for a summary of publicly reportable               rooms, lavish meals, and expensive liquor and
investigative outcomes in this category.)            wine during more than 30 trips they took to
                                                     Las Vegas, Nevada; Amelia Island, Florida;
Former CEO, CIO, and CFO of the                      Coronado, California; San Diego, California,
FHLBank of Dallas Indicted, Texas                    and other locations. In each instance, the
                                                     defendants falsely stated that the purpose of
On August 29, 2017, three former executives          their travel was to attend various conferences,
of the FHLBank of Dallas, Terence C.                 planning meetings, strategy meetings, or
Smith, Nancy B. Parker, and Michael J.               operations meetings. In fact, however, they
Sims, former President and CEO, CIO, and             did not attend any conference or conduct any
CFO, respectively, were indicted on multiple         legitimate planning, strategy, or operations
charges related to their roles in a scheme           meetings. In addition to being reimbursed
to defraud the FHLBank of Dallas. The                for numerous trips that served no legitimate



44     Federal Housing Finance Agency Offce of Inspector General
business purpose, the indictment alleges that     (AHP) funds to eligible entities through a
the defendants further defrauded the FHLBank      competitive grant funds program created by
of Dallas by requesting payment of more than      Congress to address local housing needs.
$450,000 for unused vacation time.
                                                  Williams, Executive Director of a nonprofit
The indictment also charges Parker separately     organization, Fiscal Integrity & Economic
with multiple counts for conspiring to            Development Association, Inc. (FIED), and
embezzle from the FHLBank of Dallas in            Lindsey, Chief Financial Officer of FIED,
connection with a scheme to have the bank         applied to the FHLBank of Dallas for AHP
pay for $17,000 worth of Christmas gifts,         funds through Trustmark Bank, an FHLBank
such as a wine sommelier, computer, and           of Dallas member bank. FIED was approved
video/photography equipment for Smith.            for, and received, the AHP funds.

Guilty Plea and Sentencing in Identity            The grant that Williams and Lindsey
Theft Scheme, Virginia                            administered from the FHLBank of Dallas
                                                  was intended to provide home repairs for
On August 23, 2017, Allan Richardson pled         low- to moderate-income households.
guilty to access device fraud. As an intern at    Lindsey and Williams admitted they hired
Freddie Mac’s headquarters, Richardson had        contractors to perform repairs under the grant
access to a spreadsheet that contained PII of     and instructed the contractors to inflate their
current and former employees of Freddie Mac       invoices by 20%, which was kicked back to
and affiliates. Richardson took photographs       them. The fraudulently inflated invoices were
of a computer screen displaying parts of the      submitted to the FHLBank of Dallas through
spreadsheet containing PII using his cellphone    its local member institution, Trustmark
camera. Richardson then sold the pictures to      Bank. The FHLBank of Dallas issued more
Allise Jones, who used the stolen information     than $892,000 in grants associated with 142
to obtain fraudulent identification documents     properties to FIED; Lindsey and Williams
and credit accounts used to defraud financial     received over $186,000 in kickbacks resulting
institutions, retailers, and others.              from the fraudulent invoices.

Richardson had access to PII for over 2,000
Freddie Mac employees.

On May 19, 2017, Jones was sentenced to
66 months in prison, 3 years of supervised
release, and ordered to pay $85,847 in
restitution for her role in this scheme.

Sentencing of Nonprofit Owner and
Accountant, Mississippi

On July 6, 2017, Marlene Williams and Kayla
Lindsey were sentenced for their roles in a
scheme to defraud the Federal Home Loan
Bank of Dallas. The FHLBank of Dallas
provides Affordable Housing Program



                       Semiannual Report to the Congress • April 1, 2017–September 30, 2017   45
Outreach                                            Texas, Police Department; the Cedar Hill,
                                                    Texas, Police Department; the Mississippi
OIG develops public-private partnerships            State Attorney General’s Office; the Miami-
where appropriate. It delivered 33 fraud            Dade Police Department; and the Florida
awareness briefings to different audiences          Department of Law Enforcement.
to raise awareness of its law enforcement
mission and of fraud schemes targeting              Investigations: Administrative
FHFA programs.                                      Actions
OIG has developed and intends to further            In addition to the criminal cases brought
strengthen ongoing close working                    as a result of OIG investigations, OI’s
relationships with other law enforcement            investigative work regularly results in
agencies, including DOJ and U.S. Attorneys’         administrative referrals to other entities
offices; FBI; HUD-OIG; FDIC-OIG; IRS-CI;            for action. For example, a criminal case of
the Office of the Special Inspector General         mortgage fraud that results in a guilty plea
for the Troubled Asset Relief Program; the          by a licensed real estate agent, attorney, or
Financial Crimes Enforcement Network; state         certified public accountant for participation
attorneys general; mortgage fraud working           in a bank fraud scheme might result in a
groups; and other federal, state, and local law     referral by OIG to a state licensing body
enforcement agencies nationwide. OI also            for disciplinary actions. When a real estate
works closely with Fannie Mae’s Mortgage            professional is prosecuted for mortgage fraud,
Fraud Program and with Freddie Mac’s                that prosecution may cause OIG to refer the
Financial Fraud Investigation Unit.                 matter to another federal agency for possible
                                                    suspension or debarment of that individual
During this reporting period, OIG worked            from participation in federal programs.
with additional local and state partners,           During this reporting period, OIG made 34
including the Wayne County, Michigan,               such referrals for suspension and debarment.
District Attorney’s Office; the Montgomery
County, Maryland, Police Department; the            Suspended Counterparty
Prince George’s County, Maryland, Police            Referrals
Department; the New Jersey Attorney
General’s Office; the Nassau County, New            FHFA has adopted a Suspended Counterparty
York, District Attorney’s Office; New York          Program under which it issues “suspension
State Department of Financial Services;             orders directing the regulated entities to
the Ventura County, California, District            cease or refrain” from doing business with
Attorney’s Office; the Stanislas County,            counterparties (and their affiliates) that
California, District Attorney’s Office; the         were previously found to have “engaged
Orange County, California, District Attorney’s      in covered misconduct.” Suspension of
Office; the Alameda County, California,             such counterparties is warranted to protect
District Attorney’s Office; the Chicago Police      the safety and soundness of the regulated
Department; the Cook County, Illinois, State’s      entities. For purposes of the program,
Attorney Office; the Elk Grove Village,             covered misconduct means “convictions or
Illinois, Police Department; the California         administrative sanctions within the past three
Attorney General’s Office; the Arizona              years based on fraud or similar misconduct in
Attorney General’s Office; the Michigan             connection with the mortgage business of a
Attorney General’s Office; the Mesquite,            type that would be likely to cause significant



46    Federal Housing Finance Agency Offce of Inspector General
financial or reputational harm to a regulated
entity or otherwise threaten the safe and
sound operation of a regulated entity.”

During this reporting period, OIG made
26 referrals of counterparties to FHFA for
consideration of potential suspension under
its Suspended Counterparty Program.

A summary of OIG’s referrals during the
reporting period is captured in Figure 4
(see below).

Figure 4 Administrative Actions from April
1, 2017, Through September 30, 2017

 ADMINISTRATIVE ACTIONS

 Suspension/Debarment Referrals to other agencies   34
 Suspended Counterparty Program Referrals to FHFA   26




                              Semiannual Report to the Congress • April 1, 2017–September 30, 2017   47
OIG’s Regulatory Activities and Outreach
Regulatory Activities                               Highlights of our efforts during this reporting
                                                    period include the following:
Pursuant to the Inspector General Act, OIG
assesses whether proposed legislation and           Congress
regulations related to FHFA are efficient,
economical, legal, or susceptible to fraud and      To fulfill its mission, OIG works closely
abuse. OIG is currently assessing proposed,         with Congress and is committed to keeping
interim final, and final rules published by FHFA    it fully apprised of our oversight of FHFA.
in the Federal Register. Any recommendations        During this semiannual reporting period,
or comments upon those rules will be made after     OIG provided information and briefings to
these assessments conclude.                         congressional staff on OIG work.

Public and Private                                  Hotline
Partnerships, Outreach, and
Communications                                      During this reporting period, the OIG hotline
                                                    continued to serve as a vehicle through
The Enterprises and the FHLBanks play               which Agency, Enterprise, and FHLBank
a critical role in the U.S. housing finance         employees and members of the public
system, and the financial crisis has shown          can report suspected fraud, waste, abuse,
that financial distress at the Enterprises          mismanagement, or misconduct in Agency
can threaten the U.S. economy. American             programs and operations. The individuals
taxpayers put their money and confidence            reporting can choose to remain anonymous.
in the hands of regulators and lawmakers to
restore stability to the economy, and decisions     Close Coordination with Other Oversight
were made to invest $187.5 billion in the           Organizations
Enterprises. The continuing significant role
of the Enterprises and FHLBanks in housing          During the reporting period, OIG made
finance demands constant supervision and            numerous presentations to state and local law
monitoring. Fundamental to OIG’s mission            enforcement agencies, prosecutors, mortgage
is independent and transparent oversight of         fraud working groups across the country,
Agency programs and operations and of the           and individual federal agencies sometimes
Enterprises to the extent FHFA, as conservator,     involved in mortgage fraud investigations,
has delegated responsibilities to them.             such as HUD-OIG, FBI, U.S. Postal
                                                    Inspection Service, IRS-CI, and DOJ.
OIG prioritizes outreach and engagement
to communicate its mission and work to              We maintained active participation in
members of Congress and to the public and           coordinated oversight activities during this
to actively participate in government-wide          reporting period:
oversight community activities. We continue
to forge public and private partnerships to         • FBI Cybercrimes Task Force. The
prevent fraud, encourage transparency, and            FBI’s Washington, D.C., field office
ensure accountability, responsibility, and            spearheads a cybercrimes task force, and
ethical leadership.                                   OIG has assigned two special agents to



48    Federal Housing Finance Agency Offce of Inspector General
 it. This multiagency task force focuses on        Investigations; Midwest Financial Fraud
 investigating cybercrimes. OIG made this          Investigators; the Better Business Bureau of
 assignment to help combat such crimes             Dallas; Indiana Department of Revenue; Real
 and to work in partnership with multiple          Estate Fraud Advisory Team, Ventura County,
 federal agencies. This concerted effort           California; and local and regional banks.
 will help prosecute cybercriminals
 and stop cyberattacks made against
 institutions maintaining PII, trade secrets,
 and financial data.

• CIGIE. OIG actively participates in several
  CIGIE committees and working groups:
    o The Inspection and Evaluation
      Committee
    o The Investigation Committee
    o The Audit Committee

• Council of Inspectors General on
  Financial Oversight (CIGFO). CIGFO
  was created by the Dodd-Frank Wall
  Street Reform and Consumer Protection
  Act of 2010 to oversee the Financial
  Stability Oversight Council (FSOC),
  which is charged with identifying risks
  to the financial stability of the United
  States, promoting market discipline, and
  responding to emerging risks to the stability
  of the U.S. financial system. OIG is a
  permanent member of CIGFO, along with
  the IGs of Treasury, FDIC, the Securities
  and Exchange Commission, and others.
  By statute, CIGFO may convene working
  groups to evaluate the effectiveness and
  internal operations of FSOC.

Private-Public Partnerships

Housing finance professionals are on
the frontlines and often have a real-time
understanding of emerging threats and
misconduct. We speak with officials at the
FHLBanks and the Enterprises to benefit from
their insights and also make presentations
to industry groups. Recent presentations
include: the United States Trustee
Program (nationwide); TransUnion Fraud



                        Semiannual Report to the Congress • April 1, 2017–September 30, 2017   49
Appendices
Appendix A:                                         Default: Occurs when a mortgagor misses
                                                    one or more payments.
Glossary and
Acronyms                                            Dodd-Frank Wall Street Reform and
                                                    Consumer Protection Act of 2010:
                                                    Legislation that intends to promote the
Glossary of Terms                                   financial stability of the United States by
                                                    improving accountability and transparency in
Bankruptcy: A legal procedure for resolving         the financial system, to end “too big to fail,”
debt problems of individuals and businesses;        to protect the American taxpayer by ending
specifically, a case filed under one of the         bailouts, and to protect consumers from
chapters of Title 11 of the U.S. Code.              abusive financial services practices.

CAMELSO: FHFA’s examiners use a uniform             Fannie Mae: A federally chartered corporation
rating system called CAMELSO, under                 that purchases residential mortgages and pools
which each regulated entity and the Office          them into securities that are sold to investors.
of Finance is assigned a common composite           By purchasing mortgages, Fannie Mae supplies
rating based on an evaluation of various            funds to lenders so they may make loans to
aspects of its operations. Specifically, the        home buyers.
composite rating of an FHLBank, Fannie
Mae, or Freddie Mac is based on an                  Federal Home Loan Bank System: The
evaluation and rating of seven components:          FHLBanks are 11 regional cooperative
Capital, Asset Quality, Management,                 banks that U.S. lending institutions use to
Earnings, Liquidity, Sensitivity to Market          finance housing and economic development
Risk, and Operational Risk.                         in their communities. Created by Congress,
                                                    the FHLBanks have been the largest source
Conservatorship: A legal procedure for the          of funding for community lending for eight
management of financial institutions for an         decades. The FHLBanks provide loans (or
interim period during which the institution’s       “advances”) to their member banks but do not
conservator assumes responsibility for              lend directly to individual borrowers.
operating the institution and conserving its
assets. Under the Housing and Economic              Foreclosure: A legal process used by a lender
Recovery Act of 2008, the Enterprises were          to obtain possession of a mortgaged property
placed into conservatorships overseen by            in order to repay part or all of the debt.
FHFA. As conservator, FHFA has undertaken
to preserve and conserve the assets of the          Freddie Mac: A federally chartered
Enterprises and restore them to safety and          corporation that purchases residential
soundness. FHFA also has assumed the                mortgages and pools them into securities that
powers of the boards of directors, officers,        are sold to investors. By purchasing mortgages,
and shareholders; however, the day-to-day           Freddie Mac supplies funds to lenders so they
operational decision-making of each company         may make loans to home buyers.
is delegated by FHFA to the Enterprises’
existing management.



50    Federal Housing Finance Agency Offce of Inspector General
Government-Sponsored Enterprises:                  assurance that the objectives of an entity will
Business organizations chartered and               be achieved. These objectives and related
sponsored by the federal government.               risks can be broadly classified into one or
                                                   more of the following three categories:
Guarantee: A pledge to investors that the          (1) operations—effectiveness and efficiency
guarantor will bear the default risk on a pool     of operations; (2) reporting—reliability of
of loans or other collateral.                      reporting for internal and external use; and (3)
                                                   compliance—compliance with applicable laws
Housing and Economic Recovery Act                  and regulations. Internal control comprises the
of 2008: Legislation that established FHFA,        plans, methods, policies, and procedures used
which oversees the GSEs’ operations, and OIG.      to fulfill the mission, strategic plan, goals, and
HERA also expanded Treasury’s authority to         objectives of the entity. Internal control serves
provide financial support to the GSEs.             as the first line of defense in safeguarding
                                                   assets. In short, internal control helps managers
Inspector General Act of 1978:                     achieve desired results through effective
Legislation that authorizes establishment of       stewardship of resources.
offices of inspectors general, “independent
and objective units” within federal agencies,      Mortgage-Backed Securities: Debt
that: (1) conduct and supervise audits and         securities that represent interests in the cash
investigations relating to the programs and        flows—anticipated principal and interest
operations of their agencies; (2) provide          payments—from pools of mortgage loans,
leadership and coordination and recommend          most commonly on residential property.
policies for activities designed to promote
economy, efficiency, and effectiveness in          OIG Fiscal Year 2017: OIG’s FY17 covers
the administration of agency programs              October 1, 2016, through September 30, 2017.
and to prevent and detect fraud, waste, or
abuse in such programs and operations; and         Real Estate Owned: Foreclosed homes
(3) provide a means for keeping the head of        owned by government agencies or financial
the agency and Congress fully and currently        institutions, such as the Enterprises or real
informed about problems and deficiencies           estate investors. REO homes represent
relating to the administration of such             collateral seized to satisfy unpaid mortgage
programs and operations and the necessity for      loans. The investor or its representative must
and progress of corrective action.                 then sell the property on its own.

Inspector General Reform Act of 2008:              Securitization: A process whereby a
Legislation that amends the Inspector General      financial institution assembles pools of
Act to enhance the independence of inspectors      income-producing assets (such as loans) and
general and to create the Council of the           then sells securities representing an interest in
Inspectors General on Integrity and Efficiency.    the assets’ cash flows to investors.

Internal Controls: Processes effected by           Senior Preferred Stock Purchase
an entity’s oversight body, management,            Agreements: Entered into at the time the
and other personnel that provide reasonable        conservatorships were created, the PSPAs



                        Semiannual Report to the Congress • April 1, 2017–September 30, 2017     51
authorize the Enterprises to request and obtain     Underwriting: The process of analyzing a
funds from Treasury, among other matters.           loan application to determine the amount of
Under the PSPAs, the Enterprises agreed to          risk involved in making the loan. It includes
consult with Treasury concerning a variety          a review of the potential borrower’s credit
of significant business activities, capital         worthiness and an assessment of the
stock issuance, dividend payments, ending           property value.
the conservatorships, transferring assets, and
awarding executive compensation.                    Upfront Fees: One-time payments made
                                                    by lenders when a loan is acquired by an
Servicers: Intermediaries between mortgage          Enterprise. Fannie Mae refers to upfront
borrowers and owners of the loans, such as          fees as “loan level pricing adjustments” and
the Enterprises or mortgage-backed securities       Freddie Mac refers to them as “delivery fees.”
investors. Servicers collect the borrowers’
mortgage payments, remit them to the owners
of the loans, maintain appropriate records,
and address delinquencies or defaults on
behalf of the owners of the loans. For their
services, they typically receive a percentage
of the unpaid principal balance of the
mortgage loans they service. The recent
financial crisis has put more emphasis on
servicers’ handling of defaults, modifications,
short sales, and foreclosures, in addition to
their more traditional duty of collecting and
distributing monthly mortgage payments.

Short Sale: The sale of a mortgaged property
for less than what is owed on the mortgage.

Straw Buyer: A person whose credit
profile is used to serve as a cover in a
loan transaction. Straw buyers are chosen
for their ability to qualify for a mortgage
loan, causing loans that would ordinarily
be declined to be approved. Straw buyers
are often paid a fee for their involvement
in purchasing a property and usually never
intend to own or occupy the property.

Underwater: Term used to describe situations
in which the homeowner’s equity is below
zero (i.e., the home is worth less than the
balance of the loan[s] it secures).




52    Federal Housing Finance Agency Offce of Inspector General
Acronyms and Abbreviations                      FSOC            Financial Stability Oversight
                                                                Council
AB 2015-01 Advisory Bulletin 2015-01,
           FHLBank Fraud Reporting              FY17            Fiscal Year 2017

Agency       Federal Housing Finance            GAO             Government Accountability
             Agency                                             Office

Blue Book    Quality Standards for              GAGAS           Generally Accepted
             Inspection and Evaluation                          Government Auditing
                                                                Standards
CEO          Chief Executive Officer
                                                GSE             Government-Sponsored
CFO          Chief Financial Officer                            Enterprise

CIGFO        Council of Inspectors General      HERA            Housing and Economic
             on Financial Oversight                             Recovery Act of 2008

CIGIE        Council of the Inspectors          HFE             Housing Finance Examiner
             General on Integrity and
             Efficiency                         HUD-OIG         Department of Housing and
                                                                Urban Development Office of
DBR          Division of Federal Home                           Inspector General
             Loan Bank Regulation
                                                IG              Inspector General
DER          Division of Enterprise
             Regulation                         IRS-CI          Internal Revenue Service-
                                                                Criminal Investigation
DOC          Division of Conservatorship
                                                IT              Information Technology
DOJ          Department of Justice
                                                MBS             Mortgage-Backed Securities
EIC          Examiner-in-Charge
                                                MRA             Matter Requiring Attention
Enterprises Fannie Mae and Freddie Mac
                                                NIST            National Institute of Standards
FBI          Federal Bureau of                                  and Technology
             Investigation
                                                OA              Office of Audits
FDIC         Federal Deposit Insurance
             Corporation                        OCom            Office of Compliance and
                                                                Special Projects
FHFA         Federal Housing Finance
             Agency                             OGC             Federal Housing Finance
                                                                Agency Office of General
FHLBank      Federal Home Loan Bank                             Counsel



                     Semiannual Report to the Congress • April 1, 2017–September 30, 2017    53
OE            Office of Evaluations                 PII           Personally Identifiable
                                                                  Information
OI            Office of Investigations
                                                    PSPA          Senior Preferred Stock
OIG           Federal Housing Finance                             Purchase Agreement
              Agency Office of Inspector
              General                               REO           Real Estate Owned

OMB           Office of Management and              RMBS          Residential Mortgage-Backed
              Budget                                              Securities

ORA           Office of Risk Analysis               ROE           Report of Examination

PAR           Performance and                       SA            Special Agent
              Accountability Report
                                                    TCRs          Tips, Complaints, or Referrals
PCBank        Pierce Commercial Bank
                                                    Treasury      Department of the Treasury
PCBHL         PC Bank Home Loans




54    Federal Housing Finance Agency Offce of Inspector General
Appendix B:                                       recommendations and their status for all
                                                  reports with at least one recommendation still
OIG Recommendations                               pending, and includes all recommendations
                                                  made during this reporting period. Figure
In accordance with the provisions of the          6 (see page 84) summarizes reports for
Inspector General Act, one of the key             which all recommendations have been
duties of OIG is to provide to FHFA               closed. Figure 7 (see page 89) summarizes
recommendations that promote transparency,        OIG’s outstanding unimplemented
efficiency, and effectiveness in the Agency’s     recommendations, and Figure 8 (see
operations and aid in the prevention and          page 90) summarizes OIG’s outstanding
detection of fraud, waste, or abuse. Since        unimplemented recommendations by risk
OIG began operations in October 2010, we          area. OIG publishes its Compendium of Open
have made more than 375 recommendations.          Recommendations on its website.
Figure 5 (see page 56) summarizes OIG’s




                       Semiannual Report to the Congress • April 1, 2017–September 30, 2017   55
Figure 5 Summary of OIG Recommendations


                                                               Report Name
      No.                  Recommendation                                                  Status
                                                                 and Date
 AUD-2017-010-2     FHFA should reinforce, through         FHFA Failed to              Recommendation
 AUD-2017-011-1     training and supervision of DER        Complete Non-               partially agreed
                    personnel, the requirements            MRA Supervisory             to by FHFA;
                    established by FHFA and reinforced     Activities Related          implementation of
                    by DER guidance, for the risk          to Cybersecurity            recommendation
                    assessment and supervisory             Risks at Fannie Mae         is pending
                    planning process Specifcally:          Planned for the 2016
                                                           Examination Cycle
                     a.   Ensure that the annual           (AUD-2017-010,
                          supervisory strategy identifes   September 27, 2017);
                          signifcant risks and supervisory FHFA Did Not Complete
                          concerns and explains how the All Planned Supervisory
                          planned supervisory activities   Activities Related to
                          to be conducted during the       Cybersecurity Risk at
                          examination cycle address the    Freddie Mac for the
                          most signifcant risks in the     2016 Examination
                          operational risk assessment      Cycle (AUD-2017-011,
                          (Applies to AUD-2017-010 and     September 27, 2017)
                          AUD-2017-011)

                     b.   Ensure that supervisory
                          activities planned during an
                          examination cycle to address
                          the most signifcant risks in the
                          operational risk assessment
                          are completed within the
                          examination cycle (Applies to
                          AUD-2017-010)
 AUD-2017-010-3     FHFA should, except for rare             FHFA Failed to            Recommendation
 AUD-2017-011-2     instances where DER has an               Complete Non-             agreed to
                    urgent need to communicate               MRA Supervisory           by FHFA;
                    signifcant supervisory concerns to       Activities Related        implementation of
                    an Enterprise board, ensure that         to Cybersecurity          recommendation
                    all supervisory conclusions and          Risks at Fannie Mae       is pending
                    fndings reported by DER in the           Planned for the 2016
                    Enterprise’s annual ROEs are based       Examination Cycle
                    on completed work that has been          (AUD-2017-010,
                    previously communicated, when            September 27, 2017);
                    required, in writing to the Enterprise   FHFA Did Not Complete
                                                             All Planned Supervisory
                                                             Activities Related to
                                                             Cybersecurity Risk at
                                                             Freddie Mac for the
                                                             2016 Examination
                                                             Cycle (AUD-2017-011,
                                                             September 27, 2017)




56   Federal Housing Finance Agency Offce of Inspector General
                                                             Report Name
     No.               Recommendation                                                    Status
                                                               and Date
AUD-2017-010-1   FHFA should assess whether DER            FHFA Failed to            Recommendation
                 has a suffcient complement of             Complete Non-             partially agreed
                 qualifed examiners to conduct and         MRA Supervisory           to by FHFA;
                 complete those examinations rated         Activities Related        implementation of
                 by DER to be of high priority within      to Cybersecurity          recommendation
                 each supervisory cycle and address        Risks at Fannie Mae       is pending
                 the resource constraints that have        Planned for the 2016
                 adversely affected DER’s ability to       Examination Cycle
                 carry out its risk-based supervisory      (AUD-2017-010,
                 plans                                     September 27, 2017)
AUD-2017-008-1   FHFA should reinforce the                 FHFA’s 2015 Report of     Recommendation
                 requirements of DER-OPB-02 and            Examination to Fannie     agreed to
                 hold DER leadership accountable to        Mae Failed to Follow      by FHFA;
                 ensure that targeted examination          FHFA’s Standards          implementation of
                 conclusions presented in the ROE          Because it Reported       recommendation
                 are based on work that has either (1)     on an Incomplete          is pending
                 undergone quality control review and      Targeted Examination
                 been communicated in writing to the       of the Enterprise’s New
                 Enterprise, or (2) the required quality   Representation and
                 control review has been waived by         Warranty Framework
                 the Deputy Director of DER and            (AUD-2017-008,
                 documented in writing                     September 22, 2017)
AUD-2017-007-1   The FHFA Privacy Offce should             Performance Audit of      Recommendation
                 conduct a comprehensive business          the Federal Housing       agreed to
                 process analysis to identify all FHFA     Finance Agency’s          by FHFA;
                 business processes that collect PII       (FHFA) Privacy Program    implementation of
                 in electronic and hardcopy form to        (AUD-2017-007,            recommendation
                 build an inventory of where PII is        August 30, 2017)          is pending
                 stored
AUD-2017-007-2   The FHFA Privacy Offce should             Performance Audit of      Recommendation
                 develop manual and automated              the Federal Housing       agreed to
                 processes to maintain an accurate         Finance Agency’s          by FHFA;
                 and complete inventory of where PII       (FHFA) Privacy Program    implementation of
                 is stored                                 (AUD-2017-007,            recommendation
                                                           August 30, 2017)          is pending
AUD-2017-007-3   The FHFA Privacy Offce should             Performance Audit of      Recommendation
                 establish, implement, and train end       the Federal Housing       agreed to
                 users to apply naming conventions to      Finance Agency’s          by FHFA;
                 fles and folders containing PII           (FHFA) Privacy Program    implementation of
                                                           (AUD-2017-007,            recommendation
                                                           August 30, 2017)          is pending




                   Semiannual Report to the Congress • April 1, 2017–September 30, 2017             57
                                                              Report Name
      No.                  Recommendation                                                Status
                                                                and Date
 AUD-2017-007-4     The FHFA Privacy Offce should           Performance Audit of     Recommendation
                    conduct a feasibility study of          the Federal Housing      agreed to
                    available technologies to supplement    Finance Agency’s         by FHFA;
                    the manual and automated                (FHFA) Privacy Program   implementation of
                    processes to identify and secure PII    (AUD-2017-007,           recommendation
                    at rest and in transit                  August 30, 2017)         is pending
 AUD-2017-007-5     FHFA should enhance System Owner        Performance Audit of     Recommendation
                    training to include FHFA access         the Federal Housing      agreed to
                    control policies                        Finance Agency’s         by FHFA;
                                                            (FHFA) Privacy Program   implementation of
                                                            (AUD-2017-007,           recommendation
                                                            August 30, 2017)         is pending
 AUD-2017-007-6     FHFA should review all privileged       Performance Audit of     Recommendation
                    user accounts, obtain authorizations    the Federal Housing      agreed to
                    for users where none are currently      Finance Agency’s         by FHFA;
                    documented, and remove access for       (FHFA) Privacy Program   implementation of
                    those not authorized                    (AUD-2017-007,           recommendation
                                                            August 30, 2017)         is pending
 AUD-2017-006-1     FHFA should, based on the goals       NPL Sales: Additional      Recommendation
                    and requirements of NPL sales, as     Controls Would             agreed to
                    established by the Agency:            Increase Compliance        by FHFA;
                                                          with FHFA’s Sales          implementation of
                     a.   Determine the information       Requirements (AUD-         recommendation
                          necessary to assess whether all 2017-006, July 24,         is pending
                          of the goals and requirements   2017)
                          are being met;

                     b.   Update/modify the NPL sales
                          reporting requirements as
                          necessary to obtain that
                          information; and

                     c.   Update/modify the templates
                          the Enterprises use to collect
                          loan-level data from NPL buyers
                          and servicers, as necessary




58   Federal Housing Finance Agency Offce of Inspector General
                                                             Report Name
     No.               Recommendation                                                   Status
                                                               and Date
AUD-2017-006-2   FHFA should direct the Enterprises        NPL Sales: Additional    Recommendation
                 to:                                       Controls Would           agreed to
                                                           Increase Compliance      by FHFA;
                 a.   Put controls in place to identify    with FHFA’s Sales        implementation of
                      and track the simultaneous           Requirements (AUD-       recommendation
                      reporting of charge-off and          2017-006, July 24,       is pending
                      vacant property, as indicating a     2017)
                      possible walkaway violation; and

                 b.   Take action, as necessary, to
                      ensure that servicers resolve
                      possible walk away violations
                      through foreclosure, or sale or
                      donation of the loan
AUD-2017-006-3   FHFA should communicate to the            NPL Sales: Additional    Closed—Final
                 Enterprises that they have the            Controls Would           action taken by
                 authority to review loan fles to verify   Increase Compliance      FHFA
                 the accuracy of data provided by          with FHFA’s Sales
                 NPL buyers and servicers, in support      Requirements (AUD-
                 of compliance with FHFA’s sales           2017-006, July 24,
                 requirements                              2017)
AUD-2017-005-1   Because information in the report         FHFA’s Processes         Recommendation
                 could be used to circumvent FHFA’s        for General Support      agreed to
                 internal controls, it has not been        System Component         by FHFA;
                 released publicly                         Inventory Need           implementation of
                                                           Improvement (AUD-        recommendation
                                                           2017-005, May 25,        is pending
                                                           2017)
AUD-2017-005-2   Because information in the report         FHFA’s Processes         Recommendation
                 could be used to circumvent FHFA’s        for General Support      agreed to
                 internal controls, it has not been        System Component         by FHFA;
                 released publicly                         Inventory Need           implementation of
                                                           Improvement (AUD-        recommendation
                                                           2017-005, May 25,        is pending
                                                           2017)
AUD-2017-002-1   Because information in the report         Performance Audit of     Recommendation
                 could be used to circumvent               the Federal Housing      agreed to by OIG
                 OIG’s internal controls, the              Finance Agency Offce     management;
                 recommendations have not been             of Inspector General’s   implementation of
                 released publicly                         Information Security     recommendation
                                                           Program Fiscal Year      pending
                                                           2016 (AUD-2017-002,
                                                           October 26, 2016)




                   Semiannual Report to the Congress • April 1, 2017–September 30, 2017               59
                                                            Report Name
      No.                 Recommendation                                               Status
                                                              and Date
 AUD-2017-002-2     Because information in the report     Performance Audit of     Recommendation
                    could be used to circumvent           the Federal Housing      agreed to by OIG
                    OIG’s internal controls, the          Finance Agency Offce     management;
                    recommendations have not been         of Inspector General’s   implementation of
                    released publicly                     Information Security     recommendation
                                                          Program Fiscal Year      pending
                                                          2016 (AUD-2017-002,
                                                          October 26, 2016)
 AUD-2017-002-3     Because information in the report     Performance Audit of     Recommendation
                    could be used to circumvent           the Federal Housing      agreed to by OIG
                    OIG’s internal controls, the          Finance Agency Offce     management;
                    recommendations have not been         of Inspector General’s   implementation of
                    released publicly                     Information Security     recommendation
                                                          Program Fiscal Year      pending
                                                          2016 (AUD-2017-002,
                                                          October 26, 2016)




60   Federal Housing Finance Agency Offce of Inspector General
                                                         Report Name
     No.               Recommendation                                            Status
                                                           and Date
AUD-2016-007-1   FHFA should revise existing           FHFA’s Targeted        Closed—
AUD-2016-006-1   guidance to require examiners to      Examinations of        Recommendation
AUD-2016-005-5   prepare complete documentation of     Freddie Mac: Just      rejected
                 supervisory activities and maintain   Over Half of the
                 such documentation in the offcial     Targeted Examinations
                 system of record, and train DER       Planned for 2012
                 examiners on this guidance            through 2015 Were
                                                       Completed (AUD-2016-
                                                       007, September 30,
                                                       2016); FHFA’s Targeted
                                                       Examinations of
                                                       Fannie Mae: Less than
                                                       Half of the Targeted
                                                       Examinations Planned
                                                       for 2012 through
                                                       2015 Were Completed
                                                       and No Examinations
                                                       Planned for 2015 Were
                                                       Completed Before the
                                                       Report of Examination
                                                       Issued (AUD-2016-006,
                                                       September 30, 2016);
                                                       FHFA’s Supervisory
                                                       Planning Process
                                                       for the Enterprises:
                                                       Roughly Half of FHFA’s
                                                       2014 and 2015
                                                       High-Priority Planned
                                                       Targeted Examinations
                                                       Did Not Trace to Risk
                                                       Assessments and Most
                                                       High-Priority Planned
                                                       Examinations Were Not
                                                       Completed (AUD-2016-
                                                       005, September 30,
                                                       2016)




                   Semiannual Report to the Congress • April 1, 2017–September 30, 2017   61
                                                                Report Name
      No.                 Recommendation                                                   Status
                                                                  and Date
 AUD-2016-007-2     FHFA should assess whether DER            FHFA’s Targeted          Recommendation
 AUD-2016-006-2     has a suffcient complement of             Examinations of          partially agreed
                    qualifed examiners to conduct and         Freddie Mac: Just        to by FHFA;
                    complete those examinations rated         Over Half of the         implementation of
                    by DER to be of high-priority within      Targeted Examinations    recommendation
                    each supervisory cycle and address        Planned for 2012         pending
                    the resource constraints that have        through 2015 Were        FHFA provided
                    adversely affected DER’s ability to       Completed (AUD-2016-     documentation
                    carry out its risk-based supervisory      007, September 30,       on August 17,
                    plans                                     2016); FHFA’s Targeted   2017, that it
                                                              Examinations of          assessed whether
                                                              Fannie Mae: Less than    staffng levels
                                                              Half of the Targeted     were suffcient
                                                              Examinations Planned     to carry out DER
                                                              for 2012 through         responsibilities
                                                              2015 Were Completed      for fulfllment of
                                                              and No Examinations      FHFA’s mission for
                                                              Planned for 2015 Were    fscal year 2018
                                                              Completed Before the     However, we
                                                              Report of Examination    made the same
                                                              Issued (AUD-2016-006,    recommendation
                                                              September 30, 2016)      in AUD-2017-010
                                                                                       and reported the
                                                                                       recommendation
                                                                                       remained opened
 AUD-2016-007-3     FHFA should develop and implement         FHFA’s Targeted          FHFA issued
 AUD-2016-006-3     guidance that clearly requires            Examinations of          internal guidance
                    supervisory plans to identify and         Freddie Mac: Just        in May 2016
                    prioritize the planned targeted           Over Half of the         that FHFA
                    examinations that are to be               Targeted Examinations    believes confrms
                    completed for each supervisory            Planned for 2012         its general
                    cycle, in order to fully inform the ROE   through 2015 Were        agreement
                    and CAMELSO ratings for that cycle        Completed (AUD-2016-     with the
                                                              007, September 30,       recommendation
                                                              2016); FHFA’s Targeted   FHFA plans to
                                                              Examinations of          assess the
                                                              Fannie Mae: Less than    effectiveness of
                                                              Half of the Targeted     that guidance
                                                              Examinations Planned     in the frst
                                                              for 2012 through         quarter of 2017
                                                              2015 Were Completed      Recommendation
                                                              and No Examinations      remains open and
                                                              Planned for 2015 Were    will be monitored
                                                              Completed Before the
                                                              Report of Examination
                                                              Issued (AUD-2016-006,
                                                              September 30, 2016)




62   Federal Housing Finance Agency Offce of Inspector General
                                                           Report Name
     No.               Recommendation                                                 Status
                                                             and Date
AUD-2016-007-4   FHFA should develop and implement       FHFA’s Targeted          Recommendation
AUD-2016-006-4   a control that provides for the         Examinations of          agreed to
                 tracking and documentation of           Freddie Mac: Just        by FHFA;
                 planned targeted examinations,          Over Half of the         implementation of
                 through disposition, in DER’s offcial   Targeted Examinations    recommendation
                 system of record                        Planned for 2012         pending
                                                         through 2015 Were
                                                         Completed (AUD-2016-
                                                         007, September 30,
                                                         2016); FHFA’s Targeted
                                                         Examinations of
                                                         Fannie Mae: Less than
                                                         Half of the Targeted
                                                         Examinations Planned
                                                         for 2012 through
                                                         2015 Were Completed
                                                         and No Examinations
                                                         Planned for 2015 Were
                                                         Completed Before the
                                                         Report of Examination
                                                         Issued (AUD-2016-006,
                                                         September 30, 2016)
AUD-2016-007-5   FHFA should reinforce and hold          FHFA’s Targeted          FHFA issued
AUD-2016-006-5   EICs accountable to follow DER’s        Examinations of          internal guidance
                 requirement to fully document the       Freddie Mac: Just        in May 2016
                 risk-based justifcations for changes    Over Half of the         that FHFA
                 to the supervisory plan, and that       Targeted Examinations    believes confrms
                 changes to supervisory plans are        Planned for 2012         its general
                 documented and approved by              through 2015 Were        agreement
                 the EIC Ensure that examiners           Completed (AUD-2016-     with the
                 follow DER Operating Procedures         007, September 30,       recommendation
                 Bulletin 2013-DER-OPB-03 1 to           2016); FHFA’s Targeted   FHFA plans to
                 fully document the risk-based           Examinations of          assess the
                 justifcations for changes to the        Fannie Mae: Less than    effectiveness of
                 supervisory plan, and that changes      Half of the Targeted     that guidance
                 to supervisory plans are documented     Examinations Planned     in the frst
                 and approved by the EIC                 for 2012 through         quarter of 2017
                                                         2015 Were Completed      Recommendation
                                                         and No Examinations      remains open and
                                                         Planned for 2015 Were    will be monitored
                                                         Completed Before the
                                                         Report of Examination
                                                         Issued (AUD-2016-006,
                                                         September 30, 2016)




                   Semiannual Report to the Congress • April 1, 2017–September 30, 2017          63
                                                               Report Name
      No.                 Recommendation                                                  Status
                                                                 and Date
 AUD-2016-005-1     FHFA should ensure that risk             FHFA’s Supervisory       FHFA issued
                    assessments support the                  Planning Process         internal guidance
                    supervisory plans in terms of the        for the Enterprises:     in May 2016
                    targeted examinations included in        Roughly Half of FHFA’s   that FHFA
                    those supervisory plans and the          2014 and 2015            believes confrms
                    priority assigned to those targeted      High-Priority Planned    its general
                    examinations                             Targeted Examinations    agreement
                                                             Did Not Trace to Risk    with the
                                                             Assessments and Most     recommendation
                                                             High-Priority Planned    FHFA plans to
                                                             Examinations Were Not    assess the
                                                             Completed (AUD-2016-     effectiveness of
                                                             005, September 30,       that guidance
                                                             2016)                    in the frst
                                                                                      quarter of 2017
                                                                                      Recommendation
                                                                                      remains open and
                                                                                      will be monitored
 AUD-2016-005-2     FHFA should reinforce and hold the       FHFA’s Supervisory       FHFA issued
                    EICs accountable to meet FHFA’s          Planning Process         internal guidance
                    requirement for risk assessments         for the Enterprises:     in May 2016
                    to be updated semiannually, and as       Roughly Half of FHFA’s   that FHFA
                    additional information is learned that   2014 and 2015            believes confrms
                    causes signifcant changes to the         High-Priority Planned    its general
                    risk profle, such information, from      Targeted Examinations    agreement
                    whatever sources, should be factored     Did Not Trace to Risk    with the
                    into the risk assessment during the      Assessments and Most     recommendation
                    next update                              High-Priority Planned    FHFA plans to
                                                             Examinations Were Not    assess the
                                                             Completed (AUD-2016-     effectiveness of
                                                             005, September 30,       that guidance
                                                             2016)                    in the frst
                                                                                      quarter of 2017
                                                                                      Recommendation
                                                                                      remains open and
                                                                                      will be monitored
 AUD-2016-005-3     FHFA should direct DER to develop        FHFA’s Supervisory       FHFA issued
                    and implement controls to ensure         Planning Process         internal guidance
                    that high priority planned targeted      for the Enterprises:     in May 2016
                    examinations are completed before        Roughly Half of FHFA’s   that FHFA
                    lower priority targeted examinations,    2014 and 2015            believes confrms
                    unless the reason(s) for performing      High-Priority Planned    its general
                    a lower priority targeted examination    Targeted Examinations    agreement
                    in lieu of a higher priority planned     Did Not Trace to Risk    with the
                    targeted examination is documented       Assessments and Most     recommendation
                    and risk based (e g , change in          High-Priority Planned    FHFA plans to
                    process, delay in implementation)        Examinations Were Not    assess the
                                                             Completed (AUD-2016-     effectiveness of
                                                             005, September 30,       that guidance
                                                             2016)                    in the frst
                                                                                      quarter of 2017
                                                                                      Recommendation
                                                                                      remains open and
                                                                                      will be monitored




64   Federal Housing Finance Agency Offce of Inspector General
                                                           Report Name
     No.               Recommendation                                                 Status
                                                             and Date
AUD-2016-005-4   FHFA should enhance DER guidance        FHFA’s Supervisory       FHFA issued
                 to provide a common defnition for       Planning Process         internal guidance
                 the priority assigned to targeted       for the Enterprises:     in May 2016
                 examinations and require examiners      Roughly Half of FHFA’s   that FHFA
                 to document the basis of the priority   2014 and 2015            believes confrms
                 assigned to targeted examinations       High-Priority Planned    its general
                                                         Targeted Examinations    agreement
                                                         Did Not Trace to Risk    with the
                                                         Assessments and Most     recommendation
                                                         High-Priority Planned    FHFA plans to
                                                         Examinations Were Not    assess the
                                                         Completed (AUD-2016-     effectiveness of
                                                         005, September 30,       that guidance
                                                         2016)                    in the frst
                                                                                  quarter of 2017
                                                                                  Recommendation
                                                                                  remains open and
                                                                                  will be monitored
AUD-2014-021-1   Because information in the report       Kearney & Company,       Closed—Final
                 could be used to circumvent             P.C.’s Independent       action taken by
                 OIG’s internal controls, the            Evaluation of the        OIG
                 recommendations have not been           Federal Housing
                 released publicly                       Finance Agency Offce
                                                         of Inspector General’s
                                                         Information Security
                                                         Program—2014 (AUD-
                                                         2014-021, September
                                                         30, 2014)
AUD-2014-021-2   Because information in the report       Kearney & Company,       Closed—Final
                 could be used to circumvent             P.C.’s Independent       action taken by
                 OIG’s internal controls, the            Evaluation of the        OIG
                 recommendations have not been           Federal Housing
                 released publicly                       Finance Agency Offce
                                                         of Inspector General’s
                                                         Information Security
                                                         Program—2014 (AUD-
                                                         2014-021, September
                                                         30, 2014)
AUD-2014-021-3   Because information in the report       Kearney & Company,       Recommendation
                 could be used to circumvent             P.C.’s Independent       partially agreed
                 OIG’s internal controls, the            Evaluation of the        to by OIG
                 recommendations have not been           Federal Housing          management;
                 released publicly                       Finance Agency Offce     implementation of
                                                         of Inspector General’s   recommendation
                                                         Information Security     pending
                                                         Program—2014 (AUD-
                                                         2014-021, September
                                                         30, 2014)




                   Semiannual Report to the Congress • April 1, 2017–September 30, 2017             65
                                                            Report Name
      No.                 Recommendation                                               Status
                                                              and Date
 AUD-2014-021-4     Because information in the report     Kearney & Company,       Closed—Final
                    could be used to circumvent           P.C.’s Independent       action taken by
                    OIG’s internal controls, the          Evaluation of the        OIG
                    recommendations have not been         Federal Housing
                    released publicly                     Finance Agency Offce
                                                          of Inspector General’s
                                                          Information Security
                                                          Program—2014 (AUD-
                                                          2014-021, September
                                                          30, 2014)
 AUD-2014-021-5     Because information in the report     Kearney & Company,       Closed—Final
                    could be used to circumvent           P.C.’s Independent       action taken by
                    OIG’s internal controls, the          Evaluation of the        OIG
                    recommendations have not been         Federal Housing
                    released publicly                     Finance Agency Offce
                                                          of Inspector General’s
                                                          Information Security
                                                          Program—2014 (AUD-
                                                          2014-021, September
                                                          30, 2014)
 AUD-2014-021-6     Because information in the report     Kearney & Company,       Closed—Final
                    could be used to circumvent           P.C.’s Independent       action taken by
                    OIG’s internal controls, the          Evaluation of the        OIG
                    recommendations have not been         Federal Housing
                    released publicly                     Finance Agency Offce
                                                          of Inspector General’s
                                                          Information Security
                                                          Program—2014 (AUD-
                                                          2014-021, September
                                                          30, 2014)
 AUD-2014-019-1     Because information in the report     Kearney & Company,       Closed—Final
                    could be used to circumvent           P.C.’s Independent       action taken by
                    FHFA’s internal controls, the         Evaluation of the        FHFA
                    recommendations have not been         Federal Housing
                    released publicly                     Finance Agency’s
                                                          Information Security
                                                          Program—2014 (AUD-
                                                          2014-019, September
                                                          26, 2014)




66   Federal Housing Finance Agency Offce of Inspector General
                                                       Report Name
     No.               Recommendation                                           Status
                                                         and Date
AUD-2014-019-2   Because information in the report   Kearney & Company,     Closed—Final
                 could be used to circumvent         P.C.’s Independent     action taken by
                 FHFA’s internal controls, the       Evaluation of the      FHFA
                 recommendations have not been       Federal Housing
                 released publicly                   Finance Agency’s
                                                     Information Security
                                                     Program—2014 (AUD-
                                                     2014-019, September
                                                     26, 2014)
AUD-2014-019-3   Because information in the report   Kearney & Company,     Closed—Final
                 could be used to circumvent         P.C.’s Independent     action taken by
                 FHFA’s internal controls, the       Evaluation of the      FHFA
                 recommendations have not been       Federal Housing
                 released publicly                   Finance Agency’s
                                                     Information Security
                                                     Program—2014 (AUD-
                                                     2014-019, September
                                                     26, 2014)
AUD-2014-019-4   Because information in the report   Kearney & Company,     OIG review
                 could be used to circumvent         P.C.’s Independent     pending closure
                 FHFA’s internal controls, the       Evaluation of the
                 recommendations have not been       Federal Housing
                 released publicly                   Finance Agency’s
                                                     Information Security
                                                     Program—2014 (AUD-
                                                     2014-019, September
                                                     26, 2014)
AUD-2014-019-5   Because information in the report   Kearney & Company,     OIG review
                 could be used to circumvent         P.C.’s Independent     pending closure
                 FHFA’s internal controls, the       Evaluation of the
                 recommendations have not been       Federal Housing
                 released publicly                   Finance Agency’s
                                                     Information Security
                                                     Program—2014 (AUD-
                                                     2014-019, September
                                                     26, 2014)




                   Semiannual Report to the Congress • April 1, 2017–September 30, 2017       67
                                                             Report Name
      No.                 Recommendation                                               Status
                                                               and Date
 AUD-2014-019-6     Because information in the report      Kearney & Company,     Closed—Final
                    could be used to circumvent            P.C.’s Independent     action taken by
                    FHFA’s internal controls, the          Evaluation of the      FHFA
                    recommendations have not been          Federal Housing
                    released publicly                      Finance Agency’s
                                                           Information Security
                                                           Program—2014 (AUD-
                                                           2014-019, September
                                                           26, 2014)
 AUD-2014-019-7     Because information in the report      Kearney & Company,     Closed—Final
                    could be used to circumvent            P.C.’s Independent     action taken by
                    FHFA’s internal controls, the          Evaluation of the      FHFA
                    recommendations have not been          Federal Housing
                    released publicly                      Finance Agency’s
                                                           Information Security
                                                           Program—2014 (AUD-
                                                           2014-019, September
                                                           26, 2014)
 AUD-2014-019-8     Because information in the report      Kearney & Company,     Closed—Final
                    could be used to circumvent            P.C.’s Independent     action taken by
                    FHFA’s internal controls, the          Evaluation of the      FHFA
                    recommendations have not been          Federal Housing
                    released publicly                      Finance Agency’s
                                                           Information Security
                                                           Program—2014 (AUD-
                                                           2014-019, September
                                                           26, 2014)
 AUD-2012-003-1     FHFA’s Division of Housing Mission     FHFA’s Oversight of    Based on COM-
                    and Goals should formally establish    Fannie Mae’s Single-   2016-001, this
                    a policy for its review process of     Family Underwriting    recommendation
                    underwriting standards and variances   Standards (AUD-2012-   was reopened
                    including escalation of unresolved     003, March 22, 2012)   Further corrective
                    issues refecting potential lack of                            action under
                    agreement                                                     review by OIG
 AUD-2012-003-2     FHFA’s Division of Examination         FHFA’s Oversight of    Closed—Final
                    Program and Support should             Fannie Mae’s Single-   action taken by
                    enhance existing examination           Family Underwriting    FHFA
                    guidance for assessing adherence to    Standards (AUD-2012-
                    underwriting standards and variances   003, March 22, 2012)
                    from them




68   Federal Housing Finance Agency Offce of Inspector General
                                                           Report Name
    No.                Recommendation                                                 Status
                                                             and Date
EVL-2017-006-1   DER should enhance its quality          The Gap in FHFA’s        Recommendation
                 control review program so that          Quality Control Review   agreed to
                 examination conclusions from            Program Increases        by FHFA;
                 ongoing monitoring activities           the Risk of Inaccurate   implementation of
                 which do not result in fndings or       Conclusions in its       recommendation
                 remediation letters are subject to a    Reports of Examination   pending
                 quality control review prior to being   of Fannie Mae and
                 communicated to the Enterprises in      Freddie Mac (EVL-
                 ROEs                                    2017-006, August 17,
                                                         2017)
EVL-2017-004-1   FHFA should develop, communicate        FHFA’s Practice          Closed—Final
                 to DER examination staff, and           for Rotation of          action taken by
                 implement an examiner rotation          its Examiners Is         FHFA
                 practice or policy that explains the    Inconsistent between
                 time frame for examiner rotation,       its Two Supervisory
                 whether examiners would be rotated      Divisions (EVL-2017-
                 across or within Enterprises, and       004, March 28, 2017)
                 which types of examiners, in addition
                 to the EICs, would be subject to the
                 rotation practice or policy
EVL-2017-004-2   FHFA should direct DER to implement     FHFA’s Practice          Recommendation
                 a mechanism to track and document       for Rotation of          agreed to
                 over time DER examiner assignments      its Examiners Is         by FHFA;
                 by Enterprise and risk area to          Inconsistent between     implementation of
                 facilitate implementation of the        its Two Supervisory      recommendation
                 examiner rotation practice or policy    Divisions (EVL-2017-     pending
                                                         004, March 28, 2017)
EVL-2017-002-1   In 2017, or as expeditiously as         FHFA’s Examinations      Recommendation
                 possible, FHFA should complete the      Have Not Confrmed        agreed to
                 examination activities necessary to     Compliance by One        by FHFA;
                 determine whether [the Enterprise’s]    Enterprise with its      implementation of
                 risk management of nonbank              Advisory Bulletins       recommendation
                 seller/servicers meets FHFA’s           Regarding Risk           pending
                 supervisory expectations as set         Management of
                 forth in its supervisory guidance       Nonbank Sellers and
                 These activities should include an      Servicers (EVL-2017-
                 independent assessment of the           002, December 21,
                 [related matters]                       2016)




                   Semiannual Report to the Congress • April 1, 2017–September 30, 2017             69
                                                              Report Name
      No.                 Recommendation                                               Status
                                                                and Date
 EVL-2016-009-1     FHFA should revise its Examination      FHFA Failed to         Recommendation
                    Manual to:                              Consistently Deliver   partially agreed
                                                            Timely Reports of      to by FHFA; OIG
                    •   Require that each fnal ROE          Examination to the     review pending
                        be addressed and delivered          Enterprise Boards      closure
                        to the board of directors of an     and Obtain Written
                        Enterprise by DER examiners to      Responses from the
                        eliminate any confusion over the    Boards Regarding
                        meaning of the term “issue;”        Remediation of
                                                            Supervisory Concerns
                    •   Establish a timetable for           Identifed in those
                        submission of the fnal ROE          Reports (EVL-2016-
                        to each Enterprise’s board          009, July 14, 2016)
                        of directors and for DER’s
                        presentation of the ROE results,
                        conclusions, and supervisory
                        concerns to each Enterprise
                        board;

                    •   Require each Enterprise board to
                        refect its review of each annual
                        ROE in meeting minutes; and

                    •   Require each Enterprise board to
                        refect its review and approval of
                        its written response to the ROE
                        in its meeting minutes




70   Federal Housing Finance Agency Offce of Inspector General
                                                             Report Name
    No.                 Recommendation                                                Status
                                                               and Date
EVL-2016-009-2   FHFA should direct DER to develop         FHFA Failed to         Recommendation
                 detailed guidance and promulgate          Consistently Deliver   partially agreed
                 that guidance to each Enterprise’s        Timely Reports of      to by FHFA; OIG
                 board of directors that explains:         Examination to the     review pending
                                                           Enterprise Boards      closure
                 •    The purpose for DER’s annual         and Obtain Written
                      presentation to each Enterprise      Responses from the
                      board of directors on the ROE        Boards Regarding
                      results, conclusions, and            Remediation of
                      supervisory concerns and the         Supervisory Concerns
                      opportunity for directors to ask     Identifed in those
                      questions and discuss ROE            Reports (EVL-2016-
                      examination conclusions and          009, July 14, 2016)
                      supervisory concerns at that
                      presentation; and

                 •    The requirement that each
                      Enterprise board of directors
                      submit a written response to
                      the annual ROE to DER and the
                      expected level of detail regarding
                      ongoing and contemplated
                      remediation in that written
                      response
EVL-2016-009-3   FHFA should direct the Enterprises’       FHFA Failed to         Closed—
                 boards to amend their charters to         Consistently Deliver   Recommendation
                 require review by each director of        Timely Reports of      rejected
                 each annual ROE and review and            Examination to the
                 approval of the written response          Enterprise Boards
                 to DER in response to each annual         and Obtain Written
                 ROE                                       Responses from the
                                                           Boards Regarding
                                                           Remediation of
                                                           Supervisory Concerns
                                                           Identifed in those
                                                           Reports (EVL-2016-
                                                           009, July 14, 2016)




                     Semiannual Report to the Congress • April 1, 2017–September 30, 2017       71
                                                               Report Name
      No.                 Recommendation                                                  Status
                                                                 and Date
 EVL-2016-008-1     FHFA should direct DER to develop        FHFA’s Failure to        Recommendation
                    and adopt a standard template for        Consistently Identify    partially agreed
                    Enterprise ROEs, issue instructions      Specifc Defciencies      to by FHFA; OIG
                    for completing that template,            and Their Root           review pending
                    and promulgate guidance that             Causes in Its Reports    closure
                    establishes baseline elements that       of Examination
                    must be included in each ROE, such       Constrains the Ability
                    as: clear communication of defcient,     of the Enterprise
                    unsafe, or unsound practices;            Boards to Exercise
                    explanation of how those practices       Effective Oversight
                    gave rise to supervisory concerns        of Management’s
                    and defciencies; and prioritization of   Remediation of
                    remediation of supervisory concerns      Supervisory Concerns
                    and defciencies                          (EVL-2016-008, July
                                                             14, 2016)
 EVL-2016-008-2     FHFA should direct DER to revise         FHFA’s Failure to        Closed—
                    its guidance to require ROEs to          Consistently Identify    Recommendation
                    focus the boards’ attention on the       Specifc Defciencies      rejected
                    most critical and time-sensitive         and Their Root
                    supervisory concerns through (1)         Causes in Its Reports
                    the prioritization of examination        of Examination
                    fndings and conclusions and (2)          Constrains the Ability
                    identifcation of defciencies and         of the Enterprise
                    MRAs in the ROE and discussion of        Boards to Exercise
                    their root causes                        Effective Oversight
                                                             of Management’s
                                                             Remediation of
                                                             Supervisory Concerns
                                                             (EVL-2016-008, July
                                                             14, 2016)
 EVL-2016-008-3     FHFA should develop written              FHFA’s Failure to        OIG review
                    procedures for the “fatal faw”           Consistently Identify    pending closure
                    review of the ROE by Enterprise          Specifc Defciencies
                    management that establish the            and Their Root
                    purpose of the review, its duration,     Causes in Its Reports
                    and a standard message for               of Examination
                    conveying this information to            Constrains the Ability
                    Enterprise management                    of the Enterprise
                                                             Boards to Exercise
                                                             Effective Oversight
                                                             of Management’s
                                                             Remediation of
                                                             Supervisory Concerns
                                                             (EVL-2016-008, July
                                                             14, 2016)




72   Federal Housing Finance Agency Offce of Inspector General
                                                             Report Name
    No.                Recommendation                                                   Status
                                                               and Date
EVL-2016-007-1   FHFA should require the Enterprises       FHFA’s Inconsistent      Recommendation
                 to provide, in their remediation plans,   Practices in Assessing   partially agreed
                 the target date in which their internal   Enterprise Remediation   to by FHFA;
                 audit departments expect to validate      of Serious Defciencies   implementation of
                 management’s remediation of MRAs,         and Weaknesses in its    recommendation
                 and require examiners to enter that       Tracking Systems Limit   pending
                 date into a dedicated feld in the         the Effectiveness of
                 MRA tracking system                       FHFA’s Supervision of
                                                           the Enterprises (EVL-
                                                           2016-007, July 14,
                                                           2016)
EVL-2016-007-2   FHFA should require DER, upon             FHFA’s Inconsistent    Closed—Final
                 acceptance of an Enterprise’s             Practices in Assessing action taken by
                 remediation plan, to estimate the         Enterprise Remediation FHFA
                 date by which it expects to confrm        of Serious Defciencies
                 internal audit’s validation, and to       and Weaknesses in its
                 enter that date into a dedicated feld     Tracking Systems Limit
                 in the MRA tracking system                the Effectiveness of
                                                           FHFA’s Supervision of
                                                           the Enterprises (EVL-
                                                           2016-007, July 14,
                                                           2016)
EVL-2016-007-3   FHFA should ensure that the               FHFA’s Inconsistent    Closed—
                 underlying remediation documents,         Practices in Assessing Recommendation
                 including the Procedures Document,        Enterprise Remediation rejected
                 are readily available by direct link or   of Serious Defciencies
                 other means, through DER’s MRA            and Weaknesses in its
                 tracking system(s)                        Tracking Systems Limit
                                                           the Effectiveness of
                                                           FHFA’s Supervision of
                                                           the Enterprises (EVL-
                                                           2016-007, July 14,
                                                           2016)




                   Semiannual Report to the Congress • April 1, 2017–September 30, 2017             73
                                                               Report Name
      No.                 Recommendation                                                 Status
                                                                 and Date
 EVL-2016-007-4     FHFA should require DER to conduct       FHFA’s Inconsistent    Closed—Final
                    and document, in an Analysis             Practices in Assessing action taken by
                    Memorandum or other work paper,          Enterprise Remediation FHFA
                    an independent assessment of the         of Serious Defciencies
                    adequacy of each Enterprise MRA          and Weaknesses in its
                    remediation plan and the basis upon      Tracking Systems Limit
                    which such plan is either accepted       the Effectiveness of
                    or rejected, and to maintain that        FHFA’s Supervision of
                    document in DER’s supervisory            the Enterprises (EVL-
                    record-keeping system                    2016-007, July 14,
                                                             2016)
 EVL-2016-007-5     FHFA should require DER to               FHFA’s Inconsistent    Closed—
                    track interim milestones and to          Practices in Assessing Recommendation
                    independently assess and document        Enterprise Remediation rejected
                    the timeliness and adequacy of           of Serious Defciencies
                    Enterprise remediation of MRAs on a      and Weaknesses in its
                    regular basis                            Tracking Systems Limit
                                                             the Effectiveness of
                                                             FHFA’s Supervision of
                                                             the Enterprises (EVL-
                                                             2016-007, July 14,
                                                             2016)
 EVL-2016-007-6     FHFA should require DER, when            FHFA’s Inconsistent    Closed—Final
                    evaluating whether to close an MRA,      Practices in Assessing action taken by
                    to conduct and document (in an           Enterprise Remediation FHFA
                    Analysis Memorandum or other work        of Serious Defciencies
                    paper) an independent analysis of        and Weaknesses in its
                    the adequacy and sustainability of       Tracking Systems Limit
                    the Enterprise’s remediation activity,   the Effectiveness of
                    or where appropriate, the adequacy       FHFA’s Supervision of
                    of the Enterprise’s internal audit       the Enterprises (EVL-
                    validation work, and maintain that       2016-007, July 14,
                    document in DER’s supervisory            2016)
                    record-keeping system




74   Federal Housing Finance Agency Offce of Inspector General
                                                             Report Name
    No.                Recommendation                                                    Status
                                                               and Date
EVL-2016-006-1   FHFA should direct the Fannie Mae    Corporate Governance:          Recommendation
                 Board to enhance Fannie Mae’s        Cyber Risk Oversight           agreed to
                 existing cyber risk management       by the Fannie Mae              by FHFA;
                 policies to:                         Board of Directors             implementation of
                                                      Highlights the Need for        recommendation
                 a.   Require a baseline Enterprise-  FHFA’s Closer Attention        pending
                      wide cyber risk assessment with to Governance Issues
                      subsequent periodic updates;    (EVL-2016-006, March
                                                      31, 2016)
                 b.   Describe information to be
                      reported to the Board and
                      committees;

                 c.   Include a cyber risk framework
                      and cyber risk appetite
EVL-2016-006-2   FHFA should instruct the Fannie Mae       Corporate Governance:     Closed—Final
                 Board to establish and communicate        Cyber Risk Oversight      action taken by
                 a desired target state of cyber risk      by the Fannie Mae         FHFA
                 management for Fannie Mae that            Board of Directors
                 identifes and prioritizes which risks     Highlights the Need for
                 to avoid, accept, mitigate, or transfer   FHFA’s Closer Attention
                 through insurance                         to Governance Issues
                                                           (EVL-2016-006, March
                                                           31, 2016)
EVL-2016-006-3   FHFA should direct the Fannie Mae         Corporate Governance:     Recommendation
                 Board to oversee management’s             Cyber Risk Oversight      agreed to
                 efforts to leverage industry              by the Fannie Mae         by FHFA;
                 standards to:                             Board of Directors        implementation of
                                                           Highlights the Need for   recommendation
                 a.   Protect against and detect           FHFA’s Closer Attention   pending
                      existing threats;                    to Governance Issues
                                                           (EVL-2016-006, March
                 b.   Remain informed on emerging          31, 2016)
                      risks;

                 c.   Enable timely response and
                      recovery in the event of a
                      breach; and

                 d.   Achieve the desired target
                      state of cyber risk management
                      identifed in recommendation
                      2 above within a time period
                      agreed upon by the Board




                   Semiannual Report to the Congress • April 1, 2017–September 30, 2017                75
                                                               Report Name
      No.                 Recommendation                                                 Status
                                                                 and Date
 EVL-2016-003-1     FHFA should comply with FSOC             FHFA Should Map         Closed—Final
                    recommendations to take formal and       Its Supervisory         action taken by
                    timely action to compare existing        Standards for Cyber     FHFA
                    regulatory guidance to appropriate       Risk Management to
                    elements of the NIST Framework and       Appropriate Elements
                    identify the gaps between existing       of the NIST Framework
                    regulatory guidance and appropriate      (EVL-2016-003, March
                    elements of the NIST Framework           28, 2016)
 EVL-2016-003-2     FHFA should comply with FSOC             FHFA Should Map         Closed—Final
                    recommendations to determine the         Its Supervisory         action taken by
                    priority in which to address the gaps    Standards for Cyber     FHFA
                                                             Risk Management to
                                                             Appropriate Elements
                                                             of the NIST Framework
                                                             (EVL-2016-003, March
                                                             28, 2016)
 EVL-2016-003-3     FHFA should comply with FSOC             FHFA Should Map         OIG review
                    recommendations to address the           Its Supervisory         pending closure
                    gaps, as prioritized, to refect and      Standards for Cyber
                    incorporate appropriate elements of      Risk Management to
                    the NIST Framework                       Appropriate Elements
                                                             of the NIST Framework
                                                             (EVL-2016-003, March
                                                             28, 2016)
 EVL-2016-003-4     FHFA should comply with FSOC             FHFA Should Map         OIG review
                    recommendations to revise existing       Its Supervisory         pending closure
                    regulatory guidance to refect and        Standards for Cyber
                    incorporate appropriate elements         Risk Management to
                    of the NIST Framework in a manner        Appropriate Elements
                    that achieves consistency with other     of the NIST Framework
                    federal fnancial regulators              (EVL-2016-003, March
                                                             28, 2016)
 EVL-2016-001-1     FHFA should implement detailed           Utility of FHFA’s       Recommendation
                    risk assessment guidance that            Semi-Annual Risk        agreed to
                    provides minimum requirements            Assessments Would       by FHFA;
                    for risk assessments that facilitate     Be Enhanced Through     implementation of
                    comparable analyses for each             Adoption of Clear       recommendation
                    Enterprise’s risk positions, including   Standards and Defned    pending
                    common criteria for determining          Measures of Risk
                    whether risk levels are high, medium,    Levels (EVL-2016-001,
                    or low, year over year                   January 4, 2016)




76   Federal Housing Finance Agency Offce of Inspector General
                                                            Report Name
    No.                Recommendation                                                  Status
                                                              and Date
EVL-2016-001-2   FHFA should implement detailed risk      Utility of FHFA’s        Recommendation
                 assessment guidance that provides        Semi-Annual Risk         agreed to
                 standard requirements for format         Assessments Would        by FHFA;
                 and the documentation necessary          Be Enhanced Through      implementation of
                 to support conclusions in order          Adoption of Clear        recommendation
                 to facilitate comparisons between        Standards and Defned     pending
                 Enterprises and reduce variability       Measures of Risk
                 among DER’s risk assessments for         Levels (EVL-2016-001,
                 each Enterprise and between the          January 4, 2016)
                 Enterprises
EVL-2016-001-3   FHFA should direct DER to train its      Utility of FHFA’s        Recommendation
                 EICs and exam managers in the            Semi-Annual Risk         agreed to
                 preparation of semi-annual risk          Assessments Would        by FHFA;
                 assessments, using enhanced risk         Be Enhanced Through      implementation of
                 assessment guidance consistent           Adoption of Clear        recommendation
                 with recommendations EVL-2016-           Standards and Defned     pending
                 001-1 and EVL-2016-001-2                 Measures of Risk
                                                          Levels (EVL-2016-001,
                                                          January 4, 2016)
EVL-2015-007-1   FHFA should ensure that DER’s            Intermittent Efforts     OIG review
                 recently adopted procedures              Over Almost Four         pending closure
                 for quality control reviews meet         Years to Develop a
                 the requirements of Supervision          Quality Control Review
                 Directive 2013-01 and require DER        Process Deprived
                 to document in detail the results and    FHFA of Assurance
                 fndings of each quality control review   of the Adequacy and
                 in examination workpapers, including     Quality of Enterprise
                 any shortcomings found during the        Examinations (EVL-
                 quality control review                   2015-007, September
                                                          30, 2015)
EVL-2015-007-2   FHFA should evaluate the                 Intermittent Efforts     Closed—Final
                 effectiveness of the new quality         Over Almost Four         action taken by
                 control procedures, as implemented,      Years to Develop a       FHFA
                 one year after adoption                  Quality Control Review
                                                          Process Deprived
                                                          FHFA of Assurance
                                                          of the Adequacy and
                                                          Quality of Enterprise
                                                          Examinations (EVL-
                                                          2015-007, September
                                                          30, 2015)




                   Semiannual Report to the Congress • April 1, 2017–September 30, 2017              77
                                                               Report Name
      No.                 Recommendation                                                   Status
                                                                 and Date
 EVL-2015-003-1     FHFA should test the new human           Women and Minorities      Closed—Final
                    resource system to ensure that it will   in FHFA’s Workforce       action taken by
                    provide data suffcient to enable the     (EVL-2015-003,            FHFA
                    Agency to perform comprehensive          January 13, 2015)
                    analyses of workforce issues
 EVL-2015-003-2     FHFA should regularly analyze Agency Women and Minorities          Recommendation
                    workforce data and assess trends in in FHFA’s Workforce            agreed to
                    hiring, awards, and promotions       (EVL-2015-003,                by FHFA;
                                                         January 13, 2015)             implementation of
                                                                                       recommendation
                                                                                       pending
 EVL-2015-003-3     FHFA should adopt a diversity and        Women and Minorities      Closed—Final
                    inclusion strategic plan                 in FHFA’s Workforce       action taken by
                                                             (EVL-2015-003,            FHFA
                                                             January 13, 2015)

 EVL-2015-003-4     FHFA should research opportunities       Women and Minorities      Closed—Final
                    to partner with inner-city and other     in FHFA’s Workforce       action taken by
                    high schools, where feasible, to         (EVL-2015-003,            FHFA
                    ensure compliance with HERA              January 13, 2015)
 EVL-2014-002-1     FHFA should review its                   Update on FHFA’s        Closed—Final
                    implementation of the 2013               Efforts to Strengthen   action taken by
                    Enterprise examination plans and         its Capacity to Examine FHFA
                    document the extent to which             the Enterprises (EVL-
                    resource limitations, among other        2014-002, December
                    things, may have impeded their           19, 2013)
                    timely and thorough execution
 EVL-2014-002-2     FHFA should develop a process that       Update on FHFA’s          Recommendation
                    links annual Enterprise examination      Efforts to Strengthen     agreed to
                    plans with core team resource            its Capacity to Examine   by FHFA;
                    requirements                             the Enterprises (EVL-     implementation of
                                                             2014-002, December        recommendation
                                                             19, 2013)                 pending
 EVL-2014-002-3     FHFA should establish a strategy to      Update on FHFA’s          Recommendation
                    ensure that the necessary resources      Efforts to Strengthen     agreed to
                    are in place to ensure timely and        its Capacity to Examine   by FHFA;
                    effective Enterprise examination         the Enterprises (EVL-     implementation of
                    oversight                                2014-002, December        recommendation
                                                             19, 2013)                 pending




78   Federal Housing Finance Agency Offce of Inspector General
                                                           Report Name
    No.                Recommendation                                                 Status
                                                             and Date
EVL-2013-012-1   FHFA should ensure Fannie Mae           Evaluation of Fannie     Closed—Final
                 takes the actions necessary to          Mae’s Servicer           action taken by
                 reduce servicer reimbursement           Reimbursement            FHFA
                 processing errors These actions         Operations for
                 should include utilizing its process    Delinquency Expenses
                 accuracy data in a more effective       (EVL-2013-012,
                 manner and implementing a red fag       September 18, 2013)
                 system
EVL-2013-012-2   FHFA should require Fannie Mae to:      Evaluation of Fannie     OIG review
                                                         Mae’s Servicer           pending closure
                 Ÿ	 quantify and aggregate its           Reimbursement
                    overpayments to servicers            Operations for
                    regularly;                           Delinquency Expenses
                                                         (EVL-2013-012,
                 Ÿ	 implement a plan to reduce           September 18, 2013)
                    these overpayments by
                    (1) identifying their root causes,
                    (2) creating reduction targets,
                    and (3) holding managers
                    accountable; and

                 Ÿ	 report its fndings and progress
                    to FHFA periodically
EVL-2013-012-3   FHFA should publish Fannie Mae’s        Evaluation of Fannie     Closed—
                 reduction targets and overpayment       Mae’s Servicer           Recommendation
                 fndings                                 Reimbursement            rejected
                                                         Operations for
                                                         Delinquency Expenses
                                                         (EVL-2013-012,
                                                         September 18, 2013)
EVL-2013-010-1   Because information in the              Reducing Risk and        OIG review
                 report could be used to exploit         Preventing Fraud in      pending closure
                 vulnerabilities and circumvent          the New Securitization
                 countermeasures, the                    Infrastructure (EVL-
                 recommendations have not been           2013-010, August 22,
                 released publicly                       2013)
EVL-2013-010-2   Because information in the              Reducing Risk and        Closed—Final
                 report could be used to exploit         Preventing Fraud in      action taken by
                 vulnerabilities and circumvent          the New Securitization   FHFA
                 countermeasures, the                    Infrastructure (EVL-
                 recommendations have not been           2013-010, August 22,
                 released publicly                       2013)




                   Semiannual Report to the Congress • April 1, 2017–September 30, 2017             79
                                                              Report Name
      No.                 Recommendation                                                 Status
                                                                and Date
 EVL-2013-010-3     Because information in the              Reducing Risk and        OIG review
                    report could be used to exploit         Preventing Fraud in      pending closure
                    vulnerabilities and circumvent          the New Securitization
                    countermeasures, the                    Infrastructure (EVL-
                    recommendations have not been           2013-010, August 22,
                    released publicly                       2013)
 EVL-2013-010-4     Because information in the              Reducing Risk and        OIG review
                    report could be used to exploit         Preventing Fraud in      pending closure
                    vulnerabilities and circumvent          the New Securitization
                    countermeasures, the                    Infrastructure (EVL-
                    recommendations have not been           2013-010, August 22,
                    released publicly                       2013)
 EVL-2012-005-1     FHFA should continue its ongoing        FHFA’s Oversight         Closed—Final
                    horizontal review of unsecured credit   of the Federal           action taken by
                    practices at the FHLBanks by:           Home Loan Banks’         FHFA
                                                            Unsecured Credit Risk
                     Ÿ	 following up on any potential       Management Practices
                        evidence of violations of the       (EVL-2012-005, June
                        existing regulatory limits          28, 2012)
                        and taking supervisory and
                        enforcement actions as
                        warranted; and

                     Ÿ	 determining the extent to
                        which inadequate systems and
                        controls may compromise the
                        FHLBanks’ capacity to comply
                        with regulatory limits and
                        taking any supervisory actions
                        necessary to correct such
                        defciencies as warranted
 EVL-2012-005-2     To strengthen the regulatory            FHFA’s Oversight         Recommendation
                    framework around the extension          of the Federal           agreed to
                    of unsecured credit by the              Home Loan Banks’         by FHFA;
                    FHLBanks, as a component of future      Unsecured Credit Risk    implementation of
                    rulemakings, FHFA should consider       Management Practices     recommendation
                    the utility of:                         (EVL-2012-005, June      pending
                                                            28, 2012)
                     Ÿ	 establishing maximum overall
                        exposure limits;

                     Ÿ	 lowering the existing individual
                        counterparty limits; and

                     Ÿ	 ensuring that the unsecured
                        exposure limits are consistent
                        with the FHLBank System’s
                        housing mission




80   Federal Housing Finance Agency Offce of Inspector General
                                                           Report Name
     No.               Recommendation                                                 Status
                                                             and Date
COM-2017-005-1   FHFA should develop and implement       FHFA Should Improve      Recommendation
                 a plan containing a timeliness          its Administration       agreed to
                 standard by which to eliminate the      of the Suspended         by FHFA;
                 current backlog of referrals and        Counterparty Program     implementation of
                 prevent future backlogs                                          recommendation
                                                         (COM-2017-005, July      pending
                                                         31, 2017)
COM-2017-005-2   FHFA should document its reasons        FHFA Should Improve      Recommendation
                 for any departures from the             its Administration       agreed to
                 suspension periods prescribed in the    of the Suspended         by FHFA;
                 guidelines                              Counterparty Program     implementation of
                                                                                  recommendation
                                                         (COM-2017-005, July      pending
                                                         31, 2017)
COM-2016-004-1   FHFA should ensure that it has          Management Alert:        OIG review
                 adequate internal staff, outside        Need for Increased       pending closure
                 contractors, or both, who have          Oversight by FHFA,
                 the professional expertise              as Conservator of
                 and experience in commercial            Fannie Mae, of the
                 construction to oversee the build-out   Projected Costs
                 plans and associated budget(s), as      Associated with Fannie
                 Fannie Mae continues to revise and      Mae’s Headquarters
                 refne them                              Consolidation and
                                                         Relocation Project
                                                         (COM-2016-004, June
                                                         16, 2016)
COM-2016-004-2   FHFA should direct Fannie Mae           Management Alert:        OIG review
                 to provide regular updates and          Need for Increased       pending closure
                 formal budgetary reports to DOC         Oversight by FHFA,
                 for its review and for FHFA approval    as Conservator of
                 through the design and construction     Fannie Mae, of the
                 of Fannie Mae’s leased space in         Projected Costs
                 Midtown Center                          Associated with Fannie
                                                         Mae’s Headquarters
                                                         Consolidation and
                                                         Relocation Project
                                                         (COM-2016-004, June
                                                         16, 2016)




                   Semiannual Report to the Congress • April 1, 2017–September 30, 2017             81
                                                                 Report Name
         No.                 Recommendation                                               Status
                                                                   and Date
 COM-2015-001-1        FHFA should determine the causes of     OIG’s Compliance       Recommendation
                       the shortfalls in the Housing Finance   Review of FHFA’s       agreed to
                       Examiner Commission Program that        Implementation of      by FHFA;
                       we have identifed, and implement        Its Housing Finance    implementation of
                       a strategy to ensure the program        Examiner Commission    recommendation
                       fulflls its central objective of        Program (COM-2015-     pending
                       producing commissioned examiners        001, July 29, 2015)
                       who are qualifed to lead major risk
                       sections of GSE examinations
     OIG-2017-005-1    FHFA, as conservator, should direct     Management Alert—      Recommendation
                       the Freddie Mac Board to clarify the    Need for Increased     agreed to
                       scope of the NGC’s responsibilities     Oversight by FHFA,     by FHFA;
                       under its Charter that relate to        as Conservator, to     implementation of
                       conficts of interest involving          Ensure that Freddie    recommendation
                       executive offcers                       Mac’s Policies         pending
                                                               and Procedures
                                                               for Resolution of
                                                               Executive Offcer
                                                               Conficts of Interest
                                                               Align with the
                                                               Responsibilities of
                                                               the Nominating and
                                                               Governance Committee
                                                               of the Freddie Mac
                                                               Board of Directors
                                                               (OIG-2017-005,
                                                               September 27, 2017)
     OIG-2017-005-2    FHFA, as conservator, should direct     Management Alert—      Recommendation
                       Freddie Mac to revise its policies      Need for Increased     agreed to
                       and procedures to align with the        Oversight by FHFA,     by FHFA;
                       responsibilities assigned to the NGC    as Conservator, to     implementation of
                       and facilitate the NGC’s execution of   Ensure that Freddie    recommendation
                       its responsibilities                    Mac’s Policies         pending
                                                               and Procedures
                                                               for Resolution of
                                                               Executive Offcer
                                                               Conficts of Interest
                                                               Align with the
                                                               Responsibilities of
                                                               the Nominating and
                                                               Governance Committee
                                                               of the Freddie Mac
                                                               Board of Directors
                                                               (OIG-2017-005,
                                                               September 27, 2017)




82      Federal Housing Finance Agency Offce of Inspector General
                                                           Report Name
    No.                Recommendation                                                   Status
                                                             and Date
OIG-2017-004-1   Take appropriate action to address      Administrative             OIG review
                 conficts of interest issue involving    Investigation of Hotline   pending closure
                 an entity within FHFA’s oversight       Complaints: Conficts
                 authority Public release by OIG         of Interest Issue (OIG-
                 of the Management Alert and             2017-004, March 23,
                 accompanying expert report is           2017)
                 prohibited by the Privacy Act of 1974
                 (Pub L 93–579, 88 Stat 1896,
                 enacted December 31, 1974, 5
                 U S C § 552a)
OIG-2017-004-2   Take appropriate action to address      Administrative             OIG review
                 conficts of interest issue involving    Investigation of Hotline   pending closure
                 an entity within FHFA’s oversight       Complaints: Conficts
                 authority Public release by OIG         of Interest Issue (OIG-
                 of the Management Alert and             2017-004, March 23,
                 accompanying expert report is           2017)
                 prohibited by the Privacy Act of 1974
                 (Pub L 93–579, 88 Stat 1896,
                 enacted December 31, 1974, 5
                 U S C § 552a)




                   Semiannual Report to the Congress • April 1, 2017–September 30, 2017               83
Figure 6 Summary of OIG Reports Where All Recommendations Are Closed

                                                                                     No. of
                                  Report
                                                                                Recommendations
Review of FHFA’s Tracking and Rating of the 2013 Scorecard Objective for
the New Representation and Warranty Framework Reveals Opportunities to                 3
Strengthen the Process (AUD-2016-002)
FHFA Should Improve its Examinations of the Effectiveness of the Federal
Home Loan Banks’ Cyber Risk Management Programs by Including an                        2
Assessment of the Design of Critical Internal Controls (AUD-2016-001)
Kearney & Company, P.C.’s Independent Evaluation of the Federal Housing
Finance Agency Offce of Inspector General’s Information Security Program -             5
2015 (AUD-2015-003)
Kearney & Company, P.C.’s Independent Evaluation of the Federal Housing
Finance Agency’s Information Security Program - 2015 (AUD-2015-002)                    3

CliftonLarsenAllen, LLP’s Independent Audit of the Federal Housing Finance
Agency’s Privacy Program - 2014 (AUD-2014-020)                                         6

FHFA’s Oversight of Risks Associated with the Enterprises Relying on
Counterparties to Comply with Selling and Servicing Guidelines (AUD-2014-018)          1

FHFA Oversight of Freddie Mac’s Information Technology Investments
(AUD-2014-017)                                                                         3

FHFA’s Representation and Warranty Framework (AUD-2014-016)                            2
FHFA Oversight of Fannie Mae’s Collection of Funds from Servicers that
Closed Short Sales Below the Authorized Prices (AUD-2014-015)                          3

FHFA Actions to Manage Enterprise Risks from Nonbank Servicers
Specializing in Troubled Mortgages (AUD-2014-014)                                      2

CohnReznick LLP’s Independent Audit of FHFA’s Oversight of Enterprise
Monitoring of the Financial Condition of Mortgage Insurers (AUD-2014-013)              3

FHFA Oversight of Enterprise Controls Over Pre-Foreclosure Property
Inspections (AUD-2014-012)                                                             2

FHFA’s Use of Government Travel Cards (AUD-2014-010)                                   4
FHFA Oversight of Enterprise Handling of Aged Repurchase Demands
(AUD-2014-009)                                                                         3

FHFA’s Oversight of the Enterprises’ Use of Appraisal Data Before They Buy
Single-Family Mortgages (AUD-2014-008)                                                14

FHFA’s Implementation of Active Directory (AUD-2014-007)                               4
FHFA’s Use of Government Purchase Cards (AUD-2014-006)                                 4
FHFA Oversight of Fannie Mae’s Reimbursement Process for Pre-Foreclosure
Property Inspections (AUD-2014-005)                                                    4

FHFA Oversight of Fannie Mae’s Remediation Plan to Refund Contributions
to Borrowers for the Short Sale of Properties (AUD-2014-004)                           3

Fannie Mae’s Controls Over Short Sale Eligibility Determinations Should be
Strengthened (AUD-2014-003)                                                            6




84    Federal Housing Finance Agency Offce of Inspector General
                                                                                   No. of
                                 Report
                                                                              Recommendations
Kearney & Company, P.C.’s Independent Evaluation of the Federal Housing
Finance Agency’s Offce of Inspector General’s Information Security Program           4
- 2013 (AUD-2014-002)
Kearney & Company, P.C.’s Independent Evaluation of the Federal Housing
Finance Agency’s Information Security Program - 2013 (AUD-2014-001)                 15

FHFA Can Strengthen Controls over Its Offce of Quality Assurance
(AUD-2013-013)                                                                       7

Additional FHFA Oversight Can Improve the Real Estate Owned Pilot
Program (AUD-2013-012)                                                               3

FHFA Can Improve Its Oversight of Fannie Mae’s Recoveries from Borrowers
Who Possess the Ability to Repay Defciencies (AUD-2013-011)                          1

FHFA Can Improve Its Oversight of Freddie Mac’s Recoveries from Borrowers
Who Possess the Ability to Repay Defciencies (AUD-2013-010)                          4

Action Needed to Strengthen FHFA Oversight of Enterprise Information
Security and Privacy Programs (AUD-2013-009)                                         5

FHFA Should Develop and Implement a Risk-Based Plan to Monitor the
Enterprises’ Oversight of Their Counterparties’ Compliance with Contractual          1
Requirements Including Consumer Protection Laws (AUD-2013-008)
Enhanced FHFA Oversight Is Needed to Improve Mortgage Servicer
Compliance with Consumer Complaint Requirements (AUD-2013-007)                       9

FHFA Can Enhance Its Oversight of FHLBank Advances to Insurance
Companies by Improving Communication with State Insurance Regulators                 2
and Standard-Setting Groups (AUD-2013-006)
FHFA’s Oversight of the Asset Quality of Multifamily Housing Loans Financed
by Fannie Mae and Freddie Mac (AUD-2013-004)                                         2

CliftonLarsonAllen LLP’s Evaluation of the Federal Housing Finance Agency’s
Information Security Program - 2012 (AUD-2013-003)                                  10

FHFA’s Oversight of Contract No. FHF-10-F-0007 with Advanced Technology
Systems, Inc. (AUD-2013-002)                                                         5

FHFA’s Oversight of the Enterprises’ Efforts to Recover Losses from
Foreclosure Sales (AUD-2013-001)                                                     3

CliftonLarsonAllen LLP’s Audit of FHFA’s Controls and Protocols over
Sensitive and Proprietary Information Collected and Exchanged with the               6
Financial Stability Oversight Council (AUD-2012-009)
FHFA’s Conservator Approval Process for Fannie Mae and Freddie Mac
Business Decisions (AUD-2012-008)                                                    9

FHFA’s Oversight of the Enterprises’ Management of High-Risk Seller/
Servicers (AUD-2012-007)                                                             2

FHFA’s Call Report System (AUD-2012-006)                                             3
FHFA’s Supervisory Risk Assessment for Single-Family Real Estate Owned
(AUD-2012-005)                                                                       1




                         Semiannual Report to the Congress • April 1, 2017–September 30, 2017   85
                                                                                   No. of
                                 Report
                                                                              Recommendations
FHFA’s Supervisory Framework for Federal Home Loan Banks’ Advances and
Collateral Risk Management (AUD-2012-004)                                            7

FHFA’s Supervision of Freddie Mac’s Controls over Mortgage Servicing
Contractors (AUD-2012-001)                                                           5

FHFA’s Oversight of Fannie Mae’s Default-Related Legal Services
(AUD-2011-004)                                                                       3

Clifton Gunderson LLP’s Independent Audit of the Federal Housing Finance
Agency’s Privacy Program and Implementation - 2011 (AUD-2011-003)                    9

Clifton Gunderson LLP’s Independent Audit of the Federal Housing Finance
Agency’s Information Security Program - 2011 (AUD-2011-002)                          5

Audit of the Federal Housing Finance Agency’s Consumer Complaints
Process (AUD-2011-001)                                                               3

FHFA’s Supervisory Standards for Communication of Serious Defciencies to
Enterprise Boards and for Board Oversight of Management’s Remediation                4
Efforts are Inadequate (EVL-2016-005)
FHFA’s Examiners Did Not Meet Requirements and Guidance for Oversight
of an Enterprise’s Remediation of Serious Defciencies (EVL-2016-004)                 6

FHFA’s Exercise of Its Conservatorship Powers to Review and Approve the
Enterprises’ Annual Operating Budgets Has Not Achieved FHFA’s Stated                 4
Purpose (EVL-2015-006)
FHFA’s Oversight of Governance Risks Associated with Fannie Mae’s Selection
and Appointment of a New Chief Audit Executive (EVL-2015-004)                        5

Evaluation of the Division of Enterprise Regulation’s 2013 Examination
Records: Successes and Opportunities (EVL-2015-001)                                  1

Freddie Mac Could Further Reduce Reimbursement Errors by Reviewing
More Servicer Claims (EVL-2014-011)                                                  2

FHFA’s Oversight of the Enterprises’ Lender-Placed Insurance Costs
(EVL-2014-009)                                                                       1

Status of the Development of the Common Securitization Platform
(EVL-2014-008)                                                                       2

Recent Trends in Federal Home Loan Bank Advances to JPMorgan Chase
and Other Large Banks (EVL-2014-006)                                                 1

FHFA’s Reporting of Federal Home Loan Bank Director Expenses
(EVL-2014-005)                                                                       2

FHFA’s Oversight of the Servicing Alignment Initiative (EVL-2014-003)                3
FHFA’s Oversight of Derivative Counterparty Risk
(ESR-2014-001)                                                                       1

FHFA’s Oversight of Fannie Mae’s 2013 Settlement with Bank of America
(EVL-2013-009)                                                                       1

FHFA’s Oversight of the Federal Home Loan Banks’ Compliance with
Regulatory Limits on Extensions of Unsecured Credit (EVL-2013-008)                   2




86    Federal Housing Finance Agency Offce of Inspector General
                                                                                    No. of
                                  Report
                                                                               Recommendations
FHFA’s Initiative to Reduce the Enterprises’ Dominant Position in the
Housing Finance System by Raising Gradually Their Guarantee Fees                      2
(EVL-2013-005)
FHFA’s Oversight of the Federal Home Loan Banks’ Affordable Housing
Programs (EVL-2013-04)                                                                3

Case Study: Freddie Mac’s Unsecured Lending to Lehman Brothers Prior to
Lehman Brothers’ Bankruptcy (EVL-2013-03)                                             3

FHFA’s Oversight of the Enterprises’ Compensation of Their Executives and
Senior Professionals (EVL-2013-001)                                                   1

FHFA’s Oversight of Freddie Mac’s Investment in Inverse Floaters
(EVL-2012-009)                                                                        4

Evaluation of FHFA’s Oversight of Fannie Mae’s Transfer of Mortgage
Servicing Rights from Bank of America to High Touch Servicers                         4
(EVL-2012-008)

Follow-up on Freddie Mac’s Loan Repurchase Process (EVL-2012-007)                     1
FHFA’s Certifcations for the Preferred Stock Purchase Agreements
(EVL-2012-006)                                                                        2

Fannie Mae’s and Freddie Mac’s Participation in the 2011 Mortgage
Bankers Association Convention and Exposition (ESR-2012-004)                          2

FHFA’s Oversight of the Enterprises’ Charitable Activities
(ESR-2012-003)                                                                        2

Evaluation of FHFA’s Management of Legal Fees for Indemnifed Executives
(EVL-2012-002)                                                                        2

FHFA’s Oversight of Troubled Federal Home Loan Banks
(EVL-2012-001)                                                                        3

Evaluation of the Federal Housing Finance Agency’s Oversight of Freddie
Mac’s Repurchase Settlement with Bank of America (EVL-2011-006)                       2

Evaluation of Whether FHFA Has Suffcient Capacity to Examine the GSEs
(EVL-2011-005)                                                                        4

Evaluation of FHFA’s Oversight of Fannie Mae’s Management of Operational
Risk (EVL-2011-004)                                                                   3

Evaluation of FHFA’s Role in Negotiating Fannie Mae’s and Freddie Mac’s
Responsibilities in Treasury’s Making Home Affordable Program (EVL-2011-003)          1

Evaluation of Federal Housing Finance Agency’s Oversight of Fannie Mae’s
and Freddie Mac’s Executive Compensation Programs (EVL-2011-002)                      8

Federal Housing Finance Agency’s Exit Strategy and Planning Process for
the Enterprises’ Structural Reform (EVL-2011-001)                                     2

Compliance Review of FHFA’s Oversight of Enterprise Executive Compensation
Based on Corporate Scorecard Performance (COM-2016-002)                               2

Administrative Investigation of an Anonymous Hotline Complaint Alleging
Use of FHFA Vehicles and FHFA Employees in a Manner Inconsistent with                 7
Law and Regulation (OIG-2017-001)


                          Semiannual Report to the Congress • April 1, 2017–September 30, 2017   87
Figure 7 (see next page) summarizes                    and $24.2 milliona (see OIG, Fannie Mae
OIG’s outstanding unimplemented                        Dallas Regional Headquarters Project (OIG-
recommendations, comprised of open                     2017-002, Dec. 15, 2016)), both online at
recommendations and closed, rejected                   www.fhfaoig.gov/Reports/ManagementAlerts.
recommendations, which were closed in                  During the current reporting period, OIG
light of the Agency’s permanent rejection              questioned costs of $32 million (see OIG,
or failure to follow through on corrective             Special Report: Update on FHFA’s Oversight
action. At the end of the semiannual period,           of Fannie Mae’s Build-Out of its Newly
OIG had 62 open recommendations,                       Leased Class A Office Space in Midtown
including 43 issued before April 1, 2017,              Center (COM-2017-007, Sept. 28, 2017)),
and 20 closed, rejected recommendations, all           online at https://www.fhfaoig.gov/Reports/
of which were issued before April 1, 2017.             StatusReports. Recommendation AUD-2014-
These unimplemented recommendations                    005-1, which was rejected by FHFA, had
come from 43 different reports.                        $5,015,505 in funds put to better use. OIG
                                                       has thus questioned over $109 million in
Questioned and unsupported costs and funds             aggregate costs and funds put to better use.
put to better use identified by OIG have the
potential to produce savings. OIG identified           Figure 8 (see page 90) lists OIG’s outstanding
questioned costs during a prior reporting              unimplemented recommendations, including
period of $48,229,370 (see OIG, Management             both open recommendations and closed,
Alert: Need for Increased Oversight by                 rejected recommendations, organized by risk
FHFA, as Conservator of Fannie Mae, of the             area. Summaries for all reports are available
Projected Costs Associated with Fannie Mae’s           at www.fhfaoig.gov or through the links
Headquarters Consolidation and Relocation              provided in the accompanying table.
Project (COM-2016-004, June 16, 2016)),




a
    FHFA, in a letter dated September 29, 2017,
    disagreed with OIG’s calculation of questioned
    costs reported in this Management Alert.




88       Federal Housing Finance Agency Offce of Inspector General
Figure 7 Summary of OIG Outstanding Unimplemented Recommendations


                                                         Total Number              Dollar Value
      Fiscal     Number of Unimplemented                of Reports with           of Aggregate
       Year         Recommendations                     Unimplemented             Potential Cost
                                                       Recommendations               Savings

                0 open recommendations
       2011                                                       0                              $-
                0 closed, rejected recommendations

                2 open recommendations
       2012                                                       2                              $-
                0 closed, rejected recommendations

                4 open recommendations
       2013                                                       2                              $-
                1 closed, rejected recommendation
                5 open recommendations
       2014                                                       9                     $5,015,505
                8 closed, rejected recommendations
                3 open recommendations
       2015                                                       4                              $-
                1 closed, rejected recommendation
                22 open recommendations
       2016                                                      13b                             $-
                10 closed, rejected recommendations
                26 open recommendations
       2017                                                      13c                             $-
                0 closed, rejected recommendations
                62 open recommendations
      TOTAL                                                      43                     $5,015,505
                20 closed, rejected recommendations




b
    Recommendations from AUD-2016-007 are
    repeated in AUD-2016-006 and AUD-2016-005.
    Each repeated recommendation is only counted
    once; the reports are counted separately.
c
    As with 2016, some audit recommendations
    appear in two reports (AUD-2017-010 and AUD-
    2017-011). Recommendations are counted only
    once; reports are counted separately.




                          Semiannual Report to the Congress • April 1, 2017–September 30, 2017   89
Figure 8 Summary of OIG Open Recommendations and Closed, Unimplemented
Recommendations

Specifc Risk to be         Recommendation               Expected Impact      Report Name and Date
    Mitigated
Specifc Risk to be
                           Recommendation   Expected Impact                  Report Name and Date
    Mitigated                    Open Recommendations
                        Conservatorship: Non-Delegated Responsibilities
 Oversight of Fannie   FHFA should ensure that it      Improved oversight   Management Alert: Need
 Mae Headquarters      has adequate internal staff,                         for Increased Oversight
 Consolidation and     outside contractors, or both,                        by FHFA, as Conservator
     Relocation        who have the professional                            of Fannie Mae, of the
                       expertise and experience in                          Projected Costs Associated
                       commercial construction to                           with Fannie Mae’s
                       oversee the build-out plans                          Headquarters Consolidation
                       and associated budget(s),                            and Relocation Project
                       as Fannie Mae continues to                           (COM-2016-004, June 16,
                       revise and refne them                                2016)
                       FHFA should direct Fannie       Improved oversight   Management Alert: Need
                       Mae to provide regular                               for Increased Oversight
                       updates and formal                                   by FHFA, as Conservator
                       budgetary reports to DOC                             of Fannie Mae, of the
                       for its review and for FHFA                          Projected Costs Associated
                       approval through the design                          with Fannie Mae’s
                       and construction of Fannie                           Headquarters Consolidation
                       Mae’s leased space in                                and Relocation Project
                       Midtown Center                                       (COM-2016-004, June 16,
                                                                            2016)

                           Conservatorship: Delegated Responsibilities
     Development       Because information in          Improved fraud       Reducing Risk and
      of Common        the report could be used        prevention           Preventing Fraud in the New
     Securitization    to exploit vulnerabilities                           Securitization Infrastructure
       Platform        and circumvent                                       (EVL-2013-010, August 22,
                       countermeasures, the                                 2013)
                       recommendations have not
                       been released publicly

                       Because information in          Improved fraud       Reducing Risk and
                       the report could be used        prevention           Preventing Fraud in the New
                       to exploit vulnerabilities                           Securitization Infrastructure
                       and circumvent                                       (EVL-2013-010, August 22,
                       countermeasures, the                                 2013)
                       recommendations have not
                       been released publicly

                       Because information in          Improved fraud       Reducing Risk and
                       the report could be used        prevention           Preventing Fraud in the New
                       to exploit vulnerabilities                           Securitization Infrastructure
                       and circumvent                                       (EVL-2013-010, August 22,
                       countermeasures, the                                 2013)
                       recommendations have not
                       been released publicly




90     Federal Housing Finance Agency Offce of Inspector General
Specifc Risk to be
                           Recommendation              Expected Impact      Report Name and Date
    Mitigated
    Review and         FHFA’s Division of Housing     Improved oversight   FHFA’s Oversight of Fannie
   Enhancement         Mission and Goals should                            Mae’s Single-Family
  of Underwriting      formally establish a policy                         Underwriting Standards
     Standards         for its review process of                           (AUD-2012-003, March
                       underwriting standards                              22, 2012); see also
                       and variances, including                            Compliance Review of
                       escalation of unresolved                            FHFA’s Implementation
                       issues refecting potential                          of Its Procedures for
                       lack of agreement                                   Overseeing the Enterprises’
                                                                           Single-Family Mortgage
                                                                           Underwriting Standards and
                                                                           Variances (COM-2016-001,
                                                                           December 17, 2015)
Conficts of Interest   Take appropriate action to     Improved oversight   Administrative Investigation
                       address conficts of interest                        of Hotline Complaints:
                       issue involving an entity                           Conficts of Interest Issue
                       within FHFA’s oversight                             (OIG-2017-004, March 23,
                       authority Public release                            2017)
                       by OIG of the Management
                       Alert and accompanying
                       expert report is prohibited
                       by the Privacy Act of 1974
                       (Pub L 93–579, 88 Stat
                       1896, enacted December
                       31, 1974, 5 U S C § 552a)
                       Take appropriate action to     Improved oversight   Administrative Investigation
                       address conficts of interest                        of Hotline Complaints:
                       issue involving an entity                           Conficts of Interest Issue
                       within FHFA’s oversight                             (OIG-2017-004, March 23,
                       authority Public release                            2017)
                       by OIG of the Management
                       Alert and accompanying
                       expert report is prohibited
                       by the Privacy Act of 1974
                       (Pub L 93–579, 88 Stat
                       1896, enacted December
                       31, 1974, 5 U S C § 552a)
                       FHFA, as conservator, should Improved oversight     Management Alert: Need
                       direct the Freddie Mac Board                        for Increased Oversight
                       to clarify the scope of the                         by FHFA, as Conservator,
                       Nominating and Governance                           to Ensure that Freddie
                       Committee’s responsibilities                        Mac’s Policies and
                       under its Charter that relate                       Procedures for Resolution
                       to conficts of interest                             of Executive Offcer
                       involving executive offcers                         Conficts of Interest Align
                                                                           with the Responsibilities
                                                                           of the Nominating and
                                                                           Governance Committee of
                                                                           the Freddie Mac Board of
                                                                           Directors (OIG-2017-005,
                                                                           September 27, 2017)




                        Semiannual Report to the Congress • April 1, 2017–September 30, 2017            91
Specifc Risk to be
                              Recommendation            Expected Impact      Report Name and Date
    Mitigated
                        FHFA, as conservator,          Improved oversight   Management Alert: Need
                        should direct Freddie Mac                           for Increased Oversight
                        to revise its policies and                          by FHFA, as Conservator,
                        procedures to align with the                        to Ensure that Freddie
                        responsibilities assigned                           Mac’s Policies and
                        to the NGC and facilitate                           Procedures for Resolution
                        the NGC’s execution of its                          of Executive Offcer
                        responsibilities                                    Conficts of Interest Align
                                                                            with the Responsibilities
                                                                            of the Nominating and
                                                                            Governance Committee of
                                                                            the Freddie Mac Board of
                                                                            Directors (OIG-2017-005,
                                                                            September 27, 2017)
     Compliance with    FHFA should, based on the    Improved compliance NPL Sales: Additional
      Requirements      goals and requirements of                        Controls Would Increase
                        NPL sales, as established by                     Compliance with FHFA’s
                        the Agency:                                      Sales Requirements (AUD-
                                                                         2017-006, July 24, 2017)
                         a. Determine the
                             information necessary
                             to assess whether
                             all of the goals and
                             requirements are being
                             met;

                         b.   Update/modify the non-
                              performing loan sales
                              reporting requirements
                              as necessary to obtain
                              that information; and

                         c.   Update/modify
                              the templates the
                              Enterprises use to
                              collect loan-level
                              data from non-
                              performing loan buyers
                              and servicers, as
                              necessary




92      Federal Housing Finance Agency Offce of Inspector General
Specifc Risk to be
                          Recommendation               Expected Impact       Report Name and Date
    Mitigated
                     FHFA should direct the           Improved compliance NPL Sales: Additional
                     Enterprises to:                                      Controls Would Increase
                                                                          Compliance with FHFA’s
                     a.   Put controls in place to                        Sales Requirements (AUD-
                          identify and track the                          2017-006, July 24, 2017)
                          simultaneous reporting
                          of charge-off and vacant
                          property, as indicating
                          a possible walk away
                          violation; and

                     b.   Take action, as
                          necessary, to ensure
                          that servicers resolve
                          possible walk away
                          violations through
                          foreclosure, or sale or
                          donation of the loan

                                            Supervision
Examiner Capacity    FHFA should develop a            Improved supervision Update on FHFA’s Efforts to
                     process that links annual                             Strengthen its Capacity to
                     Enterprise examination                                Examine the Enterprises
                     plans with core team                                  (EVL-2014-002, December
                     resource requirements                                 19, 2013)
                     FHFA should establish a          Improved supervision Update on FHFA’s Efforts to
                     strategy to ensure that the                           Strengthen its Capacity to
                     necessary resources are                               Examine the Enterprises
                     in place to ensure timely                             (EVL-2014-002, December
                     and effective Enterprise                              19, 2013)
                     examination oversight
                     FHFA should assess               Improved supervision FHFA Failed to Complete
                     whether the DER has a                                 Non-MRA Supervisory
                     suffcient complement                                  Activities Related to
                     of qualifed examiners to                              Cybersecurity Risks at
                     conduct and complete those                            Fannie Mae Planned for the
                     examinations rated by DER                             2016 Examination Cycle
                     to be of high-priority within                         (AUD-2017-010, September
                     each supervisory cycle                                27, 2017)
                     and address the resource
                     constraints that have
                     adversely affected DER’s
                     ability to carry out its risk-
                     based supervisory plans




                      Semiannual Report to the Congress • April 1, 2017–September 30, 2017               93
Specifc Risk to be
                            Recommendation             Expected Impact       Report Name and Date
    Mitigated
     Accreditation of   FHFA should determine the     Improved quality      OIG’s Compliance Review of
       Examiners        causes of the shortfalls                            FHFA’s Implementation of Its
                        in the Housing Finance                              Housing Finance Examiner
                        Examiner Commission                                 Commission Program
                        Program that we have                                (COM-2015-001, July 29,
                        identifed, and implement                            2015)
                        a strategy to ensure the
                        program fulflls its central
                        objective of producing
                        commissioned examiners
                        who are qualifed to lead
                        major risk sections of GSE
                        examinations
 Examiner Rotation      FHFA should direct DER to     Improved supervision FHFA’s Practice for
                        implement a mechanism                              Rotation of its Examiners
                        to track and document                              Is Inconsistent between its
                        over time DER examiner                             Two Supervisory Divisions
                        assignments by Enterprise                          (EVL-2017-004, March 28,
                        and risk area to facilitate                        2017)
                        implementation of the
                        examiner rotation practice or
                        policy
     Quality Control    FHFA should ensure that       Improved quality      Intermittent Efforts Over
                        DER’s recently adopted                              Almost Four Years to
                        procedures for quality                              Develop a Quality Control
                        control reviews meet the                            Review Process Deprived
                        requirements of Supervision                         FHFA of Assurance of the
                        Directive 2013-01 and                               Adequacy and Quality of
                        require DER to document                             Enterprise Examinations
                        in detail the results and                           (EVL-2015-007, September
                        fndings of each quality                             30, 2015)
                        control review in examination
                        workpapers, including any
                        shortcomings found during
                        the quality control review
                        DER should enhance its      Improved quality        The Gap in FHFA’s Quality
                        quality control review                              Control Review Program
                        program so that examination                         Increases the Risk of
                        conclusions from ongoing                            Inaccurate Conclusions in
                        monitoring activities which                         its Reports of Examination
                        do not result in fndings                            of Fannie Mae and Freddie
                        or remediation letters                              Mac (EVL-2017-006,
                        are subject to a quality                            August 17, 2017)
                        control review prior to
                        being communicated to the
                        Enterprises in ROEs




94      Federal Housing Finance Agency Offce of Inspector General
Specifc Risk to be
                         Recommendation              Expected Impact        Report Name and Date
    Mitigated
                     FHFA should reinforce          Improved quality       FHFA’s 2015 Report of
                     the requirements of DER-                              Examination to Fannie Mae
                     OPB-02 and hold DER                                   Failed to Follow FHFA’s
                     leadership accountable                                Standards Because it
                     to ensure that targeted                               Reported on an Incomplete
                     examination conclusions                               Targeted Examination
                     presented in the ROE are                              of the Enterprise’s New
                     based on work that has                                Representation and
                     either (1) undergone quality                          Warranty Framework (AUD-
                     control review and been                               2017-008, September 22,
                     communicated in writing                               2017)
                     to the Enterprise, or (2)
                     the required quality control
                     review has been waived by
                     the Deputy Director of DER
                     and documented in writing
Risk Assessments     FHFA should implement          Improved              Utility of FHFA’s Semi-Annual
 for Supervisory     detailed risk assessment       understanding of risk Risk Assessments Would
     Planning        guidance that provides                               Be Enhanced Through
                     minimum requirements                                 Adoption of Clear Standards
                     for risk assessments                                 and Defned Measures of
                     that facilitate comparable                           Risk Levels (EVL-2016-001,
                     analyses for each                                    January 4, 2016)
                     Enterprise’s risk positions,
                     including common criteria
                     for determining whether risk
                     levels are high, medium, or
                     low, year over year
                     FHFA should implement        Improved              Utility of FHFA’s Semi-Annual
                     detailed risk assessment     understanding of risk Risk Assessments Would
                     guidance that provides                             Be Enhanced Through
                     standard requirements                              Adoption of Clear Standards
                     for format and the                                 and Defned Measures of
                     documentation necessary to                         Risk Levels (EVL-2016-001,
                     support conclusions in order                       January 4, 2016)
                     to facilitate comparisons
                     between Enterprises and
                     reduce variability among
                     DER’s risk assessments
                     for each Enterprise and
                     between the Enterprises
                     FHFA should direct DER     Improved              Utility of FHFA’s Semi-Annual
                     to train its EICs and      understanding of risk Risk Assessments Would
                     exam managers in the                             Be Enhanced Through
                     preparation of semi-annual                       Adoption of Clear Standards
                     risk assessments, using                          and Defned Measures of
                     enhanced risk assessment                         Risk Levels (EVL-2016-001,
                     guidance consistent with                         January 4, 2016)
                     recommendations EVL-2016-
                     001-1 and EVL-2016-001-2




                      Semiannual Report to the Congress • April 1, 2017–September 30, 2017          95
Specifc Risk to be
                             Recommendation             Expected Impact       Report Name and Date
    Mitigated
                       FHFA should reinforce           Improved supervision FHFA Failed to Complete
                       through training and                                 Non-MRA Supervisory
                       supervision of DER                                   Activities Related to
                       personnel, the requirements                          Cybersecurity Risks at
                       established by FHFA, and                             Fannie Mae Planned for the
                       reinforced by DER guidance,                          2016 Examination Cycle
                       for the risk assessment                              (AUD-2017-010, September
                       and supervisory planning                             27, 2017); FHFA Did Not
                       process Specifcally:                                 Complete All Planned
                                                                            Supervisory Activities
                        a.   Ensure that the annual                         Related to Cybersecurity
                             supervisory strategy                           Risks at Freddie Mac for the
                             identifes signifcant                           2016 Examination Cycle
                             risks and supervisory                          (AUD-2017-011, September
                             concerns and explains                          27, 2017)
                             how the planned
                             supervisory activities
                             to be conducted during
                             the examination cycle
                             address the most
                             signifcant risks in
                             the operational risk
                             assessment (Applies
                             to AUD-2017-010 and
                             AUD-2017-011)

                        b.   Ensure that supervisory
                             activities planned
                             during an examination
                             cycle to address the
                             most signifcant risks
                             in the operational
                             risk assessment are
                             completed within the
                             examination cycle
                             (Applies to AUD-2017-
                             010)
       Targeted        FHFA should ensure that risk Improved supervision FHFA’s Supervisory Planning
     Examinations      assessments support the                           Process for the Enterprises:
      Completed        supervisory plan in terms of                      Roughly Half of FHFA’s
                       the targeted examinations                         2014 and 2015 High-
                       included in those                                 Priority Planned Targeted
                       supervisory plans and the                         Examinations Did Not Trace
                       priority assigned to those                        to Risk Assessments and
                       targeted examinations                             Most High-Priority Planned
                                                                         Examinations Were Not
                                                                         Completed (AUD-2016-005,
                                                                         September 30, 2016)




96     Federal Housing Finance Agency Offce of Inspector General
Specifc Risk to be
                         Recommendation             Expected Impact       Report Name and Date
    Mitigated
                     FHFA should reinforce and      Improved supervision FHFA’s Supervisory Planning
                     hold the EICs accountable                           Process for the Enterprises:
                     to meet FHFA’s requirement                          Roughly Half of FHFA’s
                     for risk assessments to be                          2014 and 2015 High-
                     updated semiannually, and                           Priority Planned Targeted
                     as additional information                           Examinations Did Not Trace
                     is learned that causes                              to Risk Assessments and
                     signifcant changes to the                           Most High-Priority Planned
                     risk profle, such information,                      Examinations Were Not
                     from whatever sources,                              Completed (AUD-2016-005,
                     should be factored into the                         September 30, 2016)
                     risk assessment during the
                     next update

                     FHFA should direct DER         Improved supervision FHFA’s Supervisory Planning
                     to develop and implement                            Process for the Enterprises:
                     controls to ensure that high-                       Roughly Half of FHFA’s
                     priority planned targeted                           2014 and 2015 High-
                     examinations are completed                          Priority Planned Targeted
                     before lower priority targeted                      Examinations Did Not Trace
                     examinations, unless the                            to Risk Assessments and
                     reason(s) for performing                            Most High-Priority Planned
                     a lower priority targeted                           Examinations Were Not
                     examination in lieu of a                            Completed (AUD-2016-005,
                     higher priority planned                             September 30, 2016)
                     targeted examination is
                     documented and risk based
                     (e g , change in process,
                     delay in implementation)
                     FHFA should enhance DER        Improved supervision FHFA’s Supervisory Planning
                     guidance to provide a                               Process for the Enterprises:
                     common defnition for the                            Roughly Half of FHFA’s
                     priority assigned to targeted                       2014 and 2015 High-
                     examinations and require                            Priority Planned Targeted
                     examiners to document the                           Examinations Did Not Trace
                     basis of the priority assigned                      to Risk Assessments and
                     to targeted examinations                            Most High-Priority Planned
                                                                         Examinations Were Not
                                                                         Completed (AUD-2016-005,
                                                                         September 30, 2016)




                      Semiannual Report to the Congress • April 1, 2017–September 30, 2017         97
Specifc Risk to be
                         Recommendation            Expected Impact      Report Name and Date
    Mitigated
                     FHFA should assess whether Improved supervision FHFA’s Targeted
                     DER has a suffcient                             Examinations of Freddie
                     complement of qualifed                          Mac: Just Over Half of the
                     examiners to conduct                            Targeted Examinations
                     and complete those                              Planned for 2012 through
                     examinations rated by DER                       2015 Were Completed
                     to be of high-priority within                   (AUD-2016-007, September
                     each supervisory cycle                          30, 2016); FHFA’s Targeted
                     and address the resource                        Examinations of Fannie
                     constraints that have                           Mae: Less than Half of
                     adversely affected DER’s                        the Targeted Examinations
                     ability to carry out its risk-                  Planned for 2012 through
                     based supervisory plans                         2015 Were Completed and
                                                                     No Examinations Planned
                                                                     for 2015 Were Completed
                                                                     Before the Report of
                                                                     Examination Issued (AUD-
                                                                     2016-006, September 30,
                                                                     2016)
                     FHFA should develop and      Improved supervision FHFA’s Targeted
                     implement guidance that                           Examinations of Freddie
                     clearly requires supervisory                      Mac: Just Over Half of the
                     plans to identify and                             Targeted Examinations
                     prioritize the planned                            Planned for 2012 through
                     targeted examinations that                        2015 Were Completed
                     are to be completed for each                      (AUD-2016-007, September
                     supervisory cycle, in order                       30, 2016); FHFA’s Targeted
                     to fully inform the ROE and                       Examinations of Fannie
                     CAMELSO ratings for that                          Mae: Less than Half of
                     cycle                                             the Targeted Examinations
                                                                       Planned for 2012 through
                                                                       2015 Were Completed and
                                                                       No Examinations Planned
                                                                       for 2015 Were Completed
                                                                       Before the Report of
                                                                       Examination Issued (AUD-
                                                                       2016-006, September 30,
                                                                       2016)




98   Federal Housing Finance Agency Offce of Inspector General
Specifc Risk to be
                         Recommendation             Expected Impact      Report Name and Date
    Mitigated
                     FHFA should develop and       Improved supervision FHFA’s Targeted
                     implement a control that                           Examinations of Freddie
                     provides for the tracking and                      Mac: Just Over Half of the
                     documentation of planned                           Targeted Examinations
                     targeted examinations,                             Planned for 2012 through
                     through disposition, in DER’s                      2015 Were Completed
                     offcial system of record                           (AUD-2016-007, September
                                                                        30, 2016); FHFA’s Targeted
                                                                        Examinations of Fannie
                                                                        Mae: Less than Half of
                                                                        the Targeted Examinations
                                                                        Planned for 2012 through
                                                                        2015 Were Completed and
                                                                        No Examinations Planned
                                                                        for 2015 Were Completed
                                                                        Before the Report of
                                                                        Examination Issued (AUD-
                                                                        2016-006, September 30,
                                                                        2016)
                     FHFA should reinforce and     Improved supervision FHFA’s Targeted
                     hold EICs accountable to                           Examinations of Freddie
                     follow DER’s requirement                           Mac: Just Over Half of the
                     to fully document the risk-                        Targeted Examinations
                     based justifcations for                            Planned for 2012 through
                     changes to the supervisory                         2015 Were Completed
                     plan, and that changes                             (AUD-2016-007, September
                     to supervisory plans are                           30, 2016); FHFA’s Targeted
                     documented and approved                            Examinations of Fannie
                     by the EIC Ensure that                             Mae: Less than Half of
                     examiners follow DER                               the Targeted Examinations
                     Operating Procedures                               Planned for 2012 through
                     Bulletin 2013-DER-OPB-03 1                         2015 Were Completed and
                     to fully document the risk-                        No Examinations Planned
                     based justifcations for                            for 2015 Were Completed
                     changes to the supervisory                         Before the Report of
                     plan, and that changes                             Examination Issued (AUD-
                     to supervisory plans are                           2016-006, September 30,
                     documented and approved                            2016)
                     by the EIC
  Communication      FHFA should, except for rare Improved supervision FHFA Failed to Complete
 of Defciencies to   instances where DER has an                        Non-MRA Supervisory
 Enterprise Boards   urgent need to communicate                        Activities Related to
                     signifcant supervisory                            Cybersecurity Risks at
                     concerns to an Enterprise                         Fannie Mae Planned for the
                     board, ensure that all                            2016 Examination Cycle
                     supervisory conclusions                           (AUD-2017-010, September
                     and fndings reported by                           27, 2017); FHFA Did Not
                     DER in the Enterprise’s                           Complete All Planned
                     annual ROEs are based                             Supervisory Activities
                     on completed work that                            Related to Cybersecurity
                     has been previously                               Risks at Freddie Mac for the
                     communicated, when                                2016 Examination Cycle
                     required, in writing to the                       (AUD-2017-011, September
                     Enterprise                                        27, 2017)




                      Semiannual Report to the Congress • April 1, 2017–September 30, 2017      99
Specifc Risk to be
                         Recommendation              Expected Impact   Report Name and Date
    Mitigated
                     FHFA should revise its          Improved Board    FHFA Failed to Consistently
                     Examination Manual to:          oversight         Deliver Timely Reports
                                                                       of Examination to the
                     • Require that each fnal                          Enterprise Boards and
                       ROE be addressed and                            Obtain Written Responses
                       delivered to the board of                       from the Boards Regarding
                       directors of an Enterprise                      Remediation of Supervisory
                       by DER examiners to                             Concerns Identifed in those
                       eliminate any confusion                         Reports (EVL-2016-009,
                       over the meaning of the                         July 14, 2016)
                       term “issue;”

                     • Establish a timetable for
                       submission of the fnal
                       ROE to each Enterprise’s
                       board of directors and for
                       DER’s presentation of the
                       ROE results, conclusions,
                       and supervisory concerns
                       to each Enterprise board;

                     • Require each Enterprise
                       board to refect its review
                       of each annual ROE in
                       meeting minutes; and

                     • Require each Enterprise
                       board to refect its review
                       and approval of its written
                       response to the ROE in its
                       meeting minutes




100   Federal Housing Finance Agency Offce of Inspector General
Specifc Risk to be
                         Recommendation             Expected Impact    Report Name and Date
    Mitigated
                     FHFA should direct DER         Improved Board    FHFA Failed to Consistently
                     to develop detailed            oversight         Deliver Timely Reports
                     guidance and promulgate                          of Examination to the
                     that guidance to each                            Enterprise Boards and
                     Enterprise’s board of                            Obtain Written Responses
                     directors that explains:                         from the Boards Regarding
                                                                      Remediation of Supervisory
                     • The purpose for DER’s                          Concerns Identifed in those
                       annual presentation to                         Reports (EVL-2016-009,
                       each Enterprise board                          July 14, 2016)
                       of directors on the ROE
                       results, conclusions, and
                       supervisory concerns
                       and the opportunity for
                       directors to ask questions
                       and discuss ROE
                       examination conclusions
                       and supervisory concerns
                       at that presentation; and

                     • The requirement that
                       each Enterprise board of
                       directors submit a written
                       response to the annual
                       ROE to DER and the
                       expected level of detail
                       regarding ongoing and
                       contemplated remediation
                       in that written response
    Assessing        FHFA should require the      Improved            FHFA’s Inconsistent
  Remediation of     Enterprises to provide, in   remediation of      Practices in Assessing
   Defciencies       their remediation plans, the defciencies         Enterprise Remediation
                     target date in which their                       of Serious Defciencies
                     internal audit departments                       and Weaknesses in its
                     expect to validate                               Tracking Systems Limit
                     management’s remediation                         the Effectiveness of
                     of MRAs, and require                             FHFA’s Supervision of the
                     examiners to enter that date                     Enterprises (EVL-2016-007,
                     into a dedicated feld in the                     July 14, 2016)
                     MRA tracking system




                     Semiannual Report to the Congress • April 1, 2017–September 30, 2017    101
Specifc Risk to be
                         Recommendation            Expected Impact    Report Name and Date
    Mitigated
  Identifcation of   FHFA should direct DER        Improved Board    FHFA’s Failure to
  Defciencies and    to develop and adopt          oversight         Consistently Identify Specifc
 Their Root Causes   a standard template                             Defciencies and Their Root
                     for Enterprise ROEs,                            Causes in Its Reports of
                     issue instructions for                          Examination Constrains
                     completing that template,                       the Ability of the Enterprise
                     and promulgate guidance                         Boards to Exercise Effective
                     that establishes baseline                       Oversight of Management’s
                     elements that must be                           Remediation of Supervisory
                     included in each ROE, such                      Concerns (EVL-2016-008,
                     as: clear communication of                      July 14, 2016)
                     defcient, unsafe, or unsound
                     practices; explanation of
                     how those practices gave
                     rise to supervisory concerns
                     or defciencies; and
                     prioritization of remediation
                     of supervisory concerns and
                     defciencies
                     FHFA should develop written Improved Board      FHFA’s Failure to
                     procedures for the “fatal     oversight         Consistently Identify Specifc
                     faw” review of the ROE by                       Defciencies and Their Root
                     Enterprise management                           Causes in Its Reports of
                     that establish the purpose                      Examination Constrains
                     of the review, its duration,                    the Ability of the Enterprise
                     and a standard message for                      Boards to Exercise Effective
                     conveying this information to                   Oversight of Management’s
                     Enterprise management                           Remediation of Supervisory
                                                                     Concerns (EVL-2016-008,
                                                                     July 14, 2016)




102   Federal Housing Finance Agency Offce of Inspector General
Specifc Risk to be
                          Recommendation              Expected Impact     Report Name and Date
    Mitigated
   Extension of       To strengthen the regulatory   Improved compliance FHFA’s Oversight of the
Unsecured Credit by   framework around the                               Federal Home Loan Banks’
Federal Home Loan     extension of unsecured                             Unsecured Credit Risk
      Banks           credit by the FHLBanks,                            Management Practices
                      as a component of future                           (EVL-2012-005, June 28,
                      rulemakings, FHFA should                           2012)
                      consider the utility of:

                      • establishing maximum
                        overall exposure limits;

                      • lowering the existing
                        individual counterparty
                        limits; and

                      • ensuring that the
                        unsecured exposure limits
                        are consistent with the
                        Federal Home Loan Bank
                        System’s housing mission

                                           Counterparties
Collection of Funds   FHFA should require Fannie     Improved fnancial   Evaluation of Fannie Mae’s
  from Servicers      Mae to:                        management          Servicer Reimbursement
                                                                         Operations for Delinquency
                      • quantify and aggregate its                       Expenses (EVL-2013-012,
                        overpayments to servicers                        September 18, 2013)
                        regularly;

                      • implement a plan
                        to reduce these
                        overpayments by (1)
                        identifying their root
                        causes, (2) creating
                        reduction targets, and
                        (3) holding managers
                        accountable; and

                      • report its fndings
                        and progress to FHFA
                        periodically




                      Semiannual Report to the Congress • April 1, 2017–September 30, 2017      103
Specifc Risk to be
                          Recommendation              Expected Impact      Report Name and Date
    Mitigated
 Compliance with      In 2017, or as expeditiously   Improved risk        FHFA’s Examinations Have
 Advisory Bulletins   as possible, FHFA should       management           Not Confrmed Compliance
                      complete the examination                            by One Enterprise with its
                      activities necessary                                Advisory Bulletins Regarding
                      to determine whether                                Risk Management of
                      [the Enterprise’s] risk                             Nonbank Sellers and
                      management of nonbank                               Servicers (EVL-2017-002,
                      seller/servicers meets                              December 21, 2016)
                      FHFA’s supervisory
                      expectations as set forth
                      in its supervisory guidance
                      These activities should
                      include an independent
                      assessment of the [related
                      matters]
  Improved Fraud      FHFA should develop and        Improved fraud       FHFA Should Improve
    Prevention        implement a plan containing    prevention           its Administration of the
                      a timeliness standard by                            Suspended Counterparty
                      which to eliminate the                              Program (COM-2017-005,
                      current backlog of referrals                        July 31, 2017)
                      and prevent future backlogs
                      FHFA should document its    Improved fraud          FHFA Should Improve
                      reasons for any departures  prevention              its Administration of the
                      from the suspension periods                         Suspended Counterparty
                      described in the guidelines                         Program (COM-2017-005,
                                                                          July 31, 2017)

                                     Information Technology
  OIG Information   Because information              Improved information Kearney & Company, P.C.’s
Technology Security in the report could be           security             Independent Evaluation
                    used to circumvent OIG’s                              of the Federal Housing
                    internal controls, the                                Finance Agency Offce
                    recommendations have not                              of Inspector General’s
                    been released publicly                                Information Security
                                                                          Program–2014 (AUD-2014-
                                                                          021, September 30, 2014)
                      Because information            Improved information Performance Audit of the
                      in the report could be         security             Federal Housing Finance
                      used to circumvent OIG’s                            Agency Offce of Inspector
                      internal controls, the                              General’s Information
                      recommendations have not                            Security Program Fiscal
                      been released publicly                              Year 2016 (AUD-2017-002,
                                                                          October 26, 2016)




104    Federal Housing Finance Agency Offce of Inspector General
Specifc Risk to be
                         Recommendation            Expected Impact      Report Name and Date
    Mitigated
                     Because information          Improved information Performance Audit of the
                     in the report could be       security             Federal Housing Finance
                     used to circumvent OIG’s                          Agency Offce of Inspector
                     internal controls, the                            General’s Information
                     recommendations have not                          Security Program Fiscal
                     been released publicly                            Year 2016 (AUD-2017-002,
                                                                       October 26, 2016)
                     Because information          Improved information Performance Audit of the
                     in the report could be       security             Federal Housing Finance
                     used to circumvent OIG’s                          Agency Offce of Inspector
                     internal controls, the                            General’s Information
                     recommendations have not                          Security Program Fiscal
                     been released publicly                            Year 2016 (AUD-2017-002,
                                                                       October 26, 2016)
 FHFA Information   Because information in        Improved information Kearney & Company,
Technology Security the report could be used      security             P.C.’s Independent
                    to circumvent FHFA’s                               Evaluation of the Federal
                    internal controls, the                             Housing Finance Agency’s
                    recommendations have not                           Information Security
                    been released publicly                             Program—2014 (AUD-
                                                                       2014-019, September 26,
                                                                       2014)
                     Because information in       Improved information Kearney & Company,
                     the report could be used     security             P.C.’s Independent
                     to circumvent FHFA’s                              Evaluation of the Federal
                     internal controls, the                            Housing Finance Agency’s
                     recommendations have not                          Information Security
                     been released publicly                            Program—2014 (AUD-
                                                                       2014-019, September 26,
                                                                       2014)

                     Because information in       Improved information FHFA’s Processes for
                     the report could be used     security             General Support System
                     to circumvent FHFA’s                              Component Inventory Need
                     internal controls, the                            Improvement (AUD-2017-
                     recommendations have not                          005, May 25, 2017)
                     been released publicly
                     Because information in       Improved information FHFA’s Processes for
                     the report could be used     security             General Support System
                     to circumvent FHFA’s                              Component Inventory Need
                     internal controls, the                            Improvement (AUD-2017-
                     recommendations have not                          005, May 25, 2017)
                     been released publicly
   Information       FHFA should comply with      Improved risk        FHFA Should Map Its
 Technology Risk     FSOC recommendations         management           Supervisory Standards for
  Examinations       to address the gaps, as                           Cyber Risk Management to
                     prioritized, to refect and                        Appropriate Elements of the
                     incorporate appropriate                           NIST Framework (EVL-2016-
                     elements of the NIST                              003, March 28, 2016
                     Framework




                     Semiannual Report to the Congress • April 1, 2017–September 30, 2017     105
Specifc Risk to be
                           Recommendation           Expected Impact   Report Name and Date
    Mitigated
                     FHFA should comply with       Improved risk      FHFA Should Map Its
                     FSOC recommendations to       management         Supervisory Standards for
                     revise existing regulatory                       Cyber Risk Management to
                     guidance to refect and                           Appropriate Elements of the
                     incorporate appropriate                          NIST Framework (EVL-2016-
                     elements of the NIST                             003, March 28, 2016
                     framework in a manner
                     that achieves consistency
                     with other federal fnancial
                     regulators
Cyber Risk Oversight FHFA should direct the        Improved risk      Corporate Governance:
                     Fannie Mae Board to           management         Cyber Risk Oversight by
                     enhance Fannie Mae’s                             the Fannie Mae Board of
                     existing cyber risk                              Directors Highlights the
                     management policies to:                          Need for FHFA’s Closer
                                                                      Attention to Governance
                      a.   Require a baseline                         Issues (EVL-2016-006,
                           Enterprise-wide cyber                      March 31, 2016)
                           risk assessment with
                           subsequent periodic
                           updates;

                      b.   Describe information
                           to be reported to the
                           Board and committees;

                      c.   Include a cyber risk
                           framework and cyber
                           risk appetite




106    Federal Housing Finance Agency Offce of Inspector General
Specifc Risk to be
                           Recommendation              Expected Impact       Report Name and Date
    Mitigated
                     FHFA should direct the           Improved risk         Corporate Governance:
                     Fannie Mae Board to              management            Cyber Risk Oversight by
                     oversee management’s                                   the Fannie Mae Board of
                     efforts to leverage industry                           Directors Highlights the
                     standards to:                                          Need for FHFA’s Closer
                                                                            Attention to Governance
                      a.   Protect against and                              Issues (EVL-2016-006,
                           detect existing threats;                         March 31, 2016)

                      b.   Remain informed on
                           emerging risks;

                      c.   Enable timely response
                           and recovery in the
                           event of a breach; and

                      d.   Achieve the desired
                           target state of cyber
                           risk management
                           identifed in
                           Recommendation 2
                           within a time period
                           agreed upon by the
                           Board
Privacy Information The FHFA Privacy Offce         Improved protection Performance Audit of the
and Data Protection should conduct a               of privacy information Federal Housing Finance
                    comprehensive business                                Agency’s (FHFA) Privacy
                    process analysis to identify                          Program (AUD-2017-007,
                    all FHFA business processes                           August 30, 2017)
                    that collect PII in electronic
                    and hardcopy form to build
                    an inventory of where PII is
                    stored
                     The FHFA Privacy Offce           Improved protection Performance Audit of the
                     should develop manual and        of privacy information Federal Housing Finance
                     automated processes to                                  Agency’s (FHFA) Privacy
                     maintain an accurate and                                Program (AUD-2017-007,
                     complete inventory of where                             August 30, 2017)
                     PII is stored
                     The FHFA Privacy Offce       Improved protection Performance Audit of the
                     should establish, implement, of privacy information Federal Housing Finance
                     and train end users to apply                        Agency’s (FHFA) Privacy
                     naming conventions to fles                          Program (AUD-2017-007,
                     and folders containing PII                          August 30, 2017)
                     The FHFA Privacy Offce           Improved protection Performance Audit of the
                     should conduct a feasibility     of privacy information Federal Housing Finance
                     study of available                                      Agency’s (FHFA) Privacy
                     technologies to supplement                              Program (AUD-2017-007,
                     the manual and automated                                August 30, 2017)
                     processes to identify and
                     secure PII at rest and in
                     transit




                     Semiannual Report to the Congress • April 1, 2017–September 30, 2017          107
Specifc Risk to be
                           Recommendation              Expected Impact      Report Name and Date
    Mitigated
                       FHFA should enhance            Improved information Performance Audit of the
                       System Owner training to       security             Federal Housing Finance
                       include FHFA access control                         Agency’s (FHFA) Privacy
                       policies                                            Program (AUD-2017-007,
                                                                           August 30, 2017)
                       FHFA should review all      Improved information Performance Audit of the
                       privileged user accounts,   security             Federal Housing Finance
                       obtain authorizations for                        Agency’s (FHFA) Privacy
                       users where none are                             Program (AUD-2017-007,
                       currently documented, and                        August 30, 2017)
                       remove access for those not
                       authorized

                                        Agency Operations
 Oversight of FHFA     FHFA should regularly          Improved             Women and Minorities in
 Workforce Matters     analyze Agency workforce       opportunities and    FHFA’s Workforce
                       data and assess trends         oversight            (EVL-2015-003, January
                       in hiring, awards, and                              13, 2015)
                       promotions

                           Closed Unimplemented Recommendations
 Property Inspection   FHFA should direct the         Improved quality      FHFA Oversight of
   Quality Controls    Enterprises to establish                             Enterprise Controls Over
                       uniform pre-foreclosure                              Pre-Foreclosure Property
                       inspection quality standards                         Inspections (AUD-2014-
                       and quality control                                  012, March 25, 2014)
                       processes for inspectors
     Improperly     FHFA should direct Fannie         Improved accuracy     FHFA Oversight of Fannie
Reimbursed Property Mae to obtain a refund from                             Mae’s Reimbursement
 Inspection Claims  servicers for improperly                                Process for Pre-Foreclosure
                    reimbursed property                                     Property Inspections (AUD-
                    inspection claims, resulting                            2014-005, January 15,
                    in estimated funds put to                               2014)
                    better use of $5,015,505




108    Federal Housing Finance Agency Offce of Inspector General
Specifc R isk to be
         Risk
                          R
                          Recommenda
                            ecommendation
                                     tion             Expected Impact      R
                                                                           Report
                                                                             eport N
                                                                                   Name
                                                                                     ame and
                                                                                         and Da
                                                                                             Date
                                                                                                te
    Mi
    Miti
       tiga
         gated
            ted
  Seller/Servicer     FHFA should promptly            Improved oversight   FHFA Oversight of
   Resolution of      quantify the potential                               Enterprise Handling of
 Aged Repurchase      beneft of implementing                               Aged Repurchase Demands
     Demands          a repurchase late fee                                (AUD-2014-009, February
                      program at Fannie Mae, and                           12, 2014)
                      then determine whether
                      the potential cost of from
                      $500,000 to $5 4 million
                      still outweighs the potential
                      beneft
    Oversight of      FHFA should perform a        Improved framework      FHFA’s Representation and
     Enterprise       comprehensive analysis to    management              Warranty Framework (AUD-
 Implementation of    assess whether fnancial                              2014-016, September 17,
Representation and    risks associated with                                2014)
                      the new representation
Warranty Framework    and warranty framework,
                      including with regard
                      to sunset periods, are
                      appropriately balanced
                      between the Enterprises and
                      sellers This analysis should
                      be based on consistent
                      transactional data across
                      both Enterprises, identify
                      potential costs and benefts
                      to the Enterprises, and
                      document consideration of
                      the Agency’s objectives
 Seller/Servicer      FHFA should direct Fannie       Improved compliance FHFA’s Oversight of Risks
 Compliance with      Mae and Freddie Mac to                              Associated with the
    Guidance          assess the cost/beneft                              Enterprises Relying on
                      of a risk-based approach                            Counterparties to Comply
                      to requiring their sellers                          with Selling and Servicing
                      and servicers to provide                            Guidelines (AUD-2014-018,
                      independent, third-party                            September 26, 2014)
                      attestation reports on
                      compliance with Enterprise
                      origination and servicing
                      guidance
Collection of Funds   FHFA should publish Fannie      Improved             Evaluation of Fannie Mae’s
  from Servicers      Mae’s reduction targets and     transparency         Servicer Reimbursement
                      overpayment fndings                                  Operations for Delinquency
                                                                           Expenses (EVL-2013-012,
                                                                           September 18, 2013)




                      Semiannual Report to the Congress • April 1, 2017–September 30, 2017       109
Specifc R isk to be
         Risk
                         R
                         Recommenda
                           ecommendation
                                    tion               Expected Impact      R
                                                                            Report
                                                                              eport N
                                                                                    Name
                                                                                      ame and
                                                                                          and Da
                                                                                              Date
                                                                                                 te
    Mi
    Miti
       tiga
         gated
            ted
   Examination        DER should adopt a               Improved effciency   Evaluation of the Division
  Recordkeeping       comprehensive examination                             of Enterprise Regulation’s
    Practices         workpaper index and                                   2013 Examination
                      standardize electronic                                Records: Successes and
                      workpaper folder structures                           Opportunities (EVL-2015-
                      and naming conventions                                001, October 6, 2014)
                      between the two Core
                      Teams In addition, FHFA
                      and DER should upgrade
                      recordkeeping practices as
                      necessary to enhance the
                      identifcation and retrieval of
                      critical workpapers
    Oversight of     FHFA should develop a       Improved oversight         Compliance Review
Enterprise Executive strategy to enhance the                                of FHFA’s Oversight of
   Compensation      Executive Compensation                                 Enterprise Executive
                     Branch’s capacity to                                   Compensation Based
                     review the reasonableness                              on Corporate Scorecard
                     and justifcation of the                                Performance (COM-2016-
                     Enterprises’ annual                                    002, March 17, 2016)
                     proposals to compensate
                     their executives based
                     on Corporate Scorecard
                     performance To this end,
                     FHFA should ensure that:
                     the Enterprises submit
                     proposals containing
                     information suffcient to
                     facilitate a comprehensive
                     review by the Executive
                     Compensation Branch; the
                     Executive Compensation
                     Branch tests and verifes
                     the information in the
                     Enterprises’ proposals,
                     perhaps on a randomized
                     basis; and the Executive
                     Compensation Branch
                     follows up with the
                     Enterprises to resolve
                     any proposals that do not
                     appear to be reasonable and
                     justifed
                      FHFA should develop a policy Improved oversight       Compliance Review
                      under which it is required                            of FHFA’s Oversight of
                      to notify OIG within 10 days                          Enterprise Executive
                      of its decision not to fully                          Compensation Based
                      implement, substantially                              on Corporate Scorecard
                      alter, or abandon a corrective                        Performance (COM-2016-
                      action that served as the                             002, March 17, 2016)
                      basis for OIG’s decision to
                      close a recommendation




110   Federal Housing Finance Agency Offce of Inspector General
Specifc R isk to be
         Risk
                         R
                         Recommenda
                           ecommendation
                                    tion              Expected Impact      R
                                                                           Report
                                                                             eport N
                                                                                   Name
                                                                                     ame and
                                                                                         and Da
                                                                                             Date
                                                                                                te
    Mi
    Miti
       tiga
         gated
            ted
    Oversight of      FHFA’s Division of Housing      Improved servicing   FHFA’s Oversight of the
Servicing Alignment   Mission and Goals Deputy        compliance and       Servicing Alignment
     Initiative       Director should establish       minimized losses     Initiative (EVL-2014-003,
                      an ongoing process                                   February 12, 2014)
                      to evaluate servicers’
                      Servicing Alignment
                      Initiative compliance and
                      the effectiveness of the
                      Enterprises’ remediation
                      efforts
                      FHFA’s Division of Housing      Improved servicing   FHFA’s Oversight of the
                      Mission and Goals Deputy        compliance and       Servicing Alignment
                      Director should direct the      minimized losses     Initiative (EVL-2014-003,
                      Enterprises to provide                               February 12, 2014)
                      routinely their internal
                      reports and reviews for the
                      Division of Housing Mission
                      and Goals’ assessment
                      FHFA’s Division of Housing      Improved servicing   FHFA’s Oversight of the
                      Mission and Goals Deputy        compliance and       Servicing Alignment
                      Director should regularly       minimized losses     Initiative (EVL-2014-003,
                      review Servicing Alignment                           February 12, 2014)
                      Initiative-related guidelines
                      for enhancements or
                      revisions, as necessary,
                      based on servicers’
                      actual versus expected
                      performance




                      Semiannual Report to the Congress • April 1, 2017–September 30, 2017         111
Specifc R isk to be
         Risk
                           R
                           Recommenda
                             ecommendation
                                      tion             Expected Impact       R
                                                                             Report
                                                                               eport N
                                                                                     Name
                                                                                       ame and
                                                                                           and Da
                                                                                               Date
                                                                                                  te
    Mi
    Miti
       tiga
         gated
            ted
        Targeted        FHFA should revise existing    Improved supervision FHFA’s Targeted
      Examinations      guidance to require                                 Examinations of Freddie
       Completed        examiners to prepare                                Mac: Just Over Half of the
                        complete documentation                              Targeted Examinations
                        of supervisory activities                           Planned for 2012
                        and maintain such                                   through 2015 Were
                        documentation in the offcial                        Completed (AUD-2016-
                        system of record, and train                         007, September 30,
                        DER examiners on this                               2016); FHFA’s Targeted
                        guidance                                            Examinations of Fannie
                                                                            Mae: Less than Half of
                                                                            the Targeted Examinations
                                                                            Planned for 2012 through
                                                                            2015 Were Completed and
                                                                            No Examinations Planned
                                                                            for 2015 Were Completed
                                                                            Before the Report of
                                                                            Examination Issued (AUD-
                                                                            2016-006, September 30,
                                                                            2016); FHFA’s Supervisory
                                                                            Planning Process for the
                                                                            Enterprises: Roughly Half
                                                                            of FHFA’s 2014 and 2015
                                                                            High-Priority Planned
                                                                            Targeted Examinations
                                                                            Did Not Trace to Risk
                                                                            Assessments and Most
                                                                            High-Priority Planned
                                                                            Examinations Were Not
                                                                            Completed (AUD-2016-
                                                                            005, September 30,
                                                                            2016)




112      Federal Housing Finance Agency Offce of Inspector General
Specifc R isk to be
         Risk
                         R
                         Recommenda
                           ecommendation
                                    tion            Expected Impact     R
                                                                        Report
                                                                          eport N
                                                                                Name
                                                                                  ame and
                                                                                      and Da
                                                                                          Date
                                                                                             te
    Mi
    Miti
       tiga
         gated
            ted
   Oversight of       FHFA should review FHFA’s    Improved             FHFA’s Examiners Did Not
    Enterprise        existing requirements,       remediation of       Meet Requirements and
  Remediation of      guidance, and processes      defciencies          Guidance for Oversight
   Defciencies        regarding MRAs against the                        of an Enterprise’s
                      requirements, guidance, and                       Remediation of Serious
                      processes adopted by the                          Defciencies (EVL-2016-
                      Offce of the Comptroller of                       004), March 29, 2016)
                      the Currency, the Board of
                      Governors of the Federal
                      Reserve System, and other
                      federal fnancial regulators
                      including, but not limited
                      to, content of an MRA;
                      standards for proposed
                      remediation plans; approval
                      authority for proposed
                      remediation plans; real-
                      time assessments at
                      regular intervals of the
                      effectiveness and timeliness
                      of an Enterprise’s MRA
                      remediation efforts;
                      fnal assessment of the
                      effectiveness and timeliness
                      of an Enterprise’s MRA
                      remediation efforts; and
                      required documentation for
                      examiner oversight of MRA
                      remediation
                      Based on the results of the   Improved            FHFA’s Examiners Did Not
                      review in recommendation      remediation of      Meet Requirements and
                      1, FHFA should assess         defciencies         Guidance for Oversight
                      whether any of the existing                       of an Enterprise’s
                      requirements, guidance, and                       Remediation of Serious
                      processes adopted by FHFA                         Defciencies (EVL-2016-
                      should be enhanced, and                           004, March 29, 2016)
                      make such enhancements
  Communication       FHFA should direct the        Improved Board      FHFA Failed to Consistently
 of Defciencies to    Enterprises’ boards to        oversight           Deliver Timely Reports
 Enterprise Boards    amend their charters to                           of Examination to the
                      require review by each                            Enterprise Boards and
                      director of each annual ROE                       Obtain Written Responses
                      and review and approval of                        from the Boards Regarding
                      the written response to DER                       Remediation of Supervisory
                      in response to each annual                        Concerns Identifed in
                      ROE                                               those Reports (EVL-2016-
                                                                        009, July 14, 2016)




                      Semiannual Report to the Congress • April 1, 2017–September 30, 2017     113
Specifc R isk to be
         Risk
                         R
                         Recommenda
                           ecommendation
                                    tion            Expected Impact   R
                                                                      Report
                                                                        eport N
                                                                              Name
                                                                                ame and
                                                                                    and Da
                                                                                        Date
                                                                                           te
    Mi
    Miti
       tiga
         gated
            ted
    Assessing         FHFA should ensure that       Improved          FHFA’s Inconsistent
  Remediation of      the underlying remediation    remediation of    Practices in Assessing
   Defciencies        documents, including the      defciencies       Enterprise Remediation
                      Procedures Document,                            of Serious Defciencies
                      are readily available by                        and Weaknesses in its
                      direct link or other means,                     Tracking Systems Limit
                      through DER’s MRA tracking                      the Effectiveness of
                      system(s)                                       FHFA’s Supervision of the
                                                                      Enterprises (EVL-2016-
                                                                      007, July 14, 2016)
                      FHFA should require DER to   Improved           FHFA’s Inconsistent
                      track interim milestones and remediation of     Practices in Assessing
                      to independently assess and defciencies         Enterprise Remediation
                      document the timeliness                         of Serious Defciencies
                      and adequacy of Enterprise                      and Weaknesses in its
                      remediation of MRAs on a                        Tracking Systems Limit
                      regular basis                                   the Effectiveness of
                                                                      FHFA’s Supervision of the
                                                                      Enterprises (EVL-2016-
                                                                      007, July 14, 2016)
  Identifcation of    FHFA should direct DER to      Improved Board   FHFA’s Failure to
  Defciencies and     revise its guidance to require oversight        Consistently Identify
 Their Root Causes    ROEs to focus the boards’                       Specifc Defciencies and
                      attention of the most                           Their Root Causes in Its
                      critical and time-sensitive                     Reports of Examination
                      supervisory concerns                            Constrains the Ability of
                      through (1) the prioritization                  the Enterprise Boards
                      of examination fndings                          to Exercise Effective
                      and conclusions and (2)                         Oversight of Management’s
                      identifcation of defciencies                    Remediation of Supervisory
                      and MRAs in the ROE and                         Concerns (EVL-2016-008,
                      discussion of their root                        July 14, 2016)
                      causes
  Communication       FHFA should revise its       Improved Board     FHFA’s Supervisory
 of Defciencies to    supervision guidance to      oversight          Standards for
 Enterprise Boards    require DER to provide the                      Communication of Serious
                      Chair of the Audit Committee                    Defciencies to Enterprise
                      of an Enterprise Board with                     Boards and for Board
                      each plan submitted by                          Oversight of Management’s
                      Enterprise management                           Remediation Efforts are
                      to remediate an MRA with                        Inadequate (EVL-2016-
                      associated timetables and                       005, March 31, 2016)
                      the response by DER




114   Federal Housing Finance Agency Offce of Inspector General
Appendix C:                                              Section 5(a) of the Inspector General Act, as
                                                         amended, provides that OIG shall, not later than
Information Required                                     April 30 and October 31 of each year, prepare
                                                         semiannual reports summarizing our activities
by the Inspector                                         during the immediately preceding six-month
General Act                                              periods ending March 31 and September 30.

                                                         Below, OIG presents a table that directs the
                                                         reader to the pages of this report on which
                                                         various information required by the Inspector
                                                         General Act, as amended, may be found.

                                   Source/Requirement                                              Pages
Section 5(a)(1)- A description of signifcant problems, abuses, and defciencies relating to          10-11,
the administration of programs and operations of FHFA
                                                                                                    15-29
Section 5(a)(2)- A description of the recommendations for corrective action made by OIG            15-29,
with respect to signifcant problems, abuses, or defciencies
                                                                                                   55-114
Section 5(a)(3)- An identifcation of each signifcant recommendation described in previous          55-83,
semiannual reports on which corrective action has not been completed
                                                                                                   88-114
Section 5(a)(4)- A summary of matters referred to prosecutive authorities and the                   30-45,
prosecutions and convictions that have resulted
                                                                                                   122-150
Section 5(a)(5)- A summary of each report made to the Director of FHFA about information or
assistance requested and unreasonably refused or not provided                                        119

Section 5(a)(6)- A listing, subdivided according to subject matter, of each audit and evaluation
report issued by OIG during the reporting period and for each report, where applicable, the         15-29,
total dollar value of questioned costs (including a separate category for the dollar value of       88-89,
unsupported costs) and the dollar value of recommendations that funds be put to better use         116-117
Section 5(a)(7)- A summary of each particularly signifcant report                                   15-29
Section 5(a)(8)- Statistical tables showing the total number of audit and evaluation reports       3, 28-29,
and the total dollar value of questioned and unsupported costs
                                                                                                   116-117
Section 5(a)(9)- Statistical tables showing the total number of audit and evaluation reports       3, 28-29,
and the dollar value of recommendations that funds be put to better use by management
                                                                                                   116-117
Section 5(a)(10)(A)- A summary of each audit and evaluation report issued before the
commencement of the reporting period for which no management decision has been made                  117
by the end of the reporting period
Section 5(a)(10)(B)- A summary of each audit and evaluation report issued before the
commencement of the reporting period for which no FHFA comment was returned within 60                117
days of providing the report to the Agency
Section 5(a)(10)(C)- A summary of each audit and evaluation report issued before the
commencement of the reporting period for which there are any outstanding unimplemented             88-114
recommendations, including the aggregate potential cost savings of those recommendations
Section 5(a)(11)- A description and explanation of the reasons for any signifcant revised
management decision made during the reporting period                                                 117

Section 5(a)(12)- Information concerning any signifcant management decision with which
the Inspector General is in disagreement                                                             117



                        Semiannual Report to the Congress • April 1, 2017–September 30, 2017            115
                                   Source/Requirement                                               Pages
Section 5(a)(13)- The information described under section 804(b) of the Federal Financial
Management Improvement Act of 1996                                                                  117-118

Section 5(a)(14)- An appendix containing the results of any peer review conducted by another IG;
or the date of the last peer review if no peer review was conducted during the reporting period      118

Section 5(a)(15)- A list of any outstanding recommendations from any peer review conducted
by another IG that have not been fully implemented                                                   118

Section 5(a)(16)- A list of any peer reviews of another IG during the reporting period               118
Section 5(a)(17)- Statistical tables showing, for the reporting period, the total number of:
investigative reports issued; persons referred to DOJ for criminal prosecution; persons
referred to State and local prosecuting authorities for criminal prosecution; and indictments         31
and criminal informations that resulted from any prior referral to prosecuting authorities
Section 5(a)(18)- A description of the metrics used for developing the data for the statistical
tables under paragraph (17)                                                                           31

Section 5(a)(19)- A report on each investigation conducted by OIG involving a senior Government
employee where allegations of misconduct were substantiated, including a detailed description       118-119
of the facts and circumstances of the investigation, and the status and disposition of the matter
Section 5(a)(20)- A detailed description of any instance of whistleblower retaliation,
including information about the offcial found to have engaged in retaliation and what, if any,      118-119
consequences FHFA imposed to hold that offcial accountable
Section 5(a)(21)- A detailed description of any attempt by FHFA to interfere with the
independence of OIG, including with budget constraints designed to limit OIG’s capabilities,
and incidents where FHFA has resisted or objected to OIG oversight activities or restricted or       119
signifcantly delayed access to information
Section 5(a)(22)(A)- Detailed descriptions of the particular circumstances of each evaluation
and audit conducted by OIG that is closed and was not disclosed to the public                        119

Section 5(a)(22)(B)- Detailed descriptions of the particular circumstances of each
investigation conducted by OIG involving a senior Government employee that is closed and            118-119
was not disclosed to the public


Reports Identifying Questioned                            total number of audit reports, inspection reports,
Costs, Unsupported Costs, and                             and evaluation reports and the dollar value
Funds to Be Put to Better Use                             of questioned and unsupported costs, and of
                                                          recommendations that funds be put to better use
by Management Issued During                               by management. Oversight conducted by OIG is
the Semiannual Period                                     not limited to reports issuing from inspections,
                                                          audits, and evaluations. As this semiannual
Section 5(a)(6) of the Inspector General Act,             report explains, OIG also issues management
as amended, requires that OIG list its audit              alerts, special reports, status reports, and
reports, inspection reports, and evaluation               compliance reports in furtherance of its mission.
reports issued during the semiannual period that          Figure 9 (see page 117) summarizes the
include questioned costs, unsupported costs,              questioned and unsupported costs identified in
and funds to be put to better use. Section 5(a)           an OIG report issued during this semiannual
(8) and section 5(a)(9), respectively, require            period and any recommendations that funds be
OIG to publish statistical tables showing the             put to better use.



116     Federal Housing Finance Agency Offce of Inspector General
Figure 9 Funds to Be Put to Better Use by Management, Questioned Costs, and
Unsupported Costs for the Period April 1, 2017, Through September 30, 2017

     Report          Recommendation           Date          Potential Monetary Benefts
                          No.
     Issued                                               Questioned     Unsupported     Funds Put to
                                                            Costs           Costs         Better Use
COM-2017-007                              Sep 28, 2017   $32,000,000                $-             $-

Total                                                    $32,000,000                $-             $-


Audit and Evaluation Reports                         revised management decision made during the
with No Management Decision                          reporting period. During the six-month reporting
                                                     period ended September 30, 2017, there were no
Section 5(a)(10)(A) of the Inspector General         significant revised management decisions.
Act, as amended, requires that OIG report on
each audit, inspection, and evaluation report
issued before the commencement of the reporting
                                                     Signifcant Management
period for which no management decision has          Decisions with Which the
been made by the end of the reporting period.        Inspector General Disagrees
There were no audit, inspection, or evaluation
reports issued before April 1, 2017, that await      Section 5(a)(12) of the Inspector General
a management decision.                               Act, as amended, requires that OIG report
                                                     information concerning any significant
                                                     management decision with which the Inspector
No Agency Response Within                            General is in disagreement. During the six-
60 Days                                              month reporting period ended September 30,
                                                     2017, there was one significant management
Section 5(a)(10)(B) of the Inspector General         decision received from FHFA with which the
Act, as amended, requires that OIG report on         Inspector General disagreed. During the prior
each audit, inspection, and evaluation report        reporting period, OIG issued a management
issued before the commencement of the                alert, Administrative Investigation of Hotline
reporting period for which no FHFA comment           Complaints: Conflicts of Interest Issue
was returned within 60 days of providing the         (OIG-2017-004, March 23, 2017). FHFA
report to the Agency. There were no audit,           provided its management decision on the two
inspection, or evaluation reports issued before      recommendations contained in that report
April 1, 2017, for which OIG did not receive         to OIG during this reporting period. OIG
a response within 60 days of providing the           disagrees with FHFA’s management decision.
report to the Agency for comment.
                                                     Federal Financial Management
Signifcant Revised                                   Improvement Act of 1996
Management Decisions
                                                     Section 5(a)(13) of the Inspector General
Section 5(a)(11) of the Inspector General Act, as    Act, as amended, requires that OIG report
amended, requires that OIG report information        information concerning instances of and
concerning the reasons for any significant           reasons for failures to meet any intermediate



                       Semiannual Report to the Congress • April 1, 2017–September 30, 2017      117
target dates from remediation plans designed         The most recent peer review of our audit
to remedy findings that the Agency’s financial       organization was conducted by the Pension
management systems do not comply with                Benefit Guaranty Corporation Office of
federal financial management system                  Inspector General (PBGC-OIG) and reported
requirements, applicable federal accounting          on February 28, 2017. OIG received a final
standards, and the United States Government          System Review Report with a rating of pass,
Standard General Ledger at the transaction           which is the highest rating that can be issued
level. This reporting provision did not apply        to an audit organization.
to the Agency or OIG for the reporting period.
                                                     Copies of both peer review reports are on
In its Financial Audit: Federal Housing              OIG’s website; see www.fhfaoig.gov/Reports/
Finance Agency’s Fiscal Years 2016 and               PeerReview.
2015 Financial Statements report, GAO
did not identify any deficiencies in FHFA’s          During this semiannual period, OIG
internal controls over financial reporting that      conducted a peer review of the Architect of
it considered to be a material weakness or           the Capitol, Office of Inspector General’s
significant deficiency. HERA requires GAO to         Investigative Unit (AOC-OIG). The review
conduct this audit.                                  was conducted in conformity with the Quality
                                                     Standards for Investigations and the Quality
                                                     Assessment Review (QAR) Guidelines
Peer Reviews                                         established by the CIGIE. The review team
                                                     found the examined areas to be in compliance
Sections 5(a)(14), (15), and (16) of the             with CIGIE standards. On September 12,
Inspector General Act, as amended, require           2017, AOC-OIG was provided with a report
that OIG provide information relevant to             on the QAR and a Letter of Observations
the semiannual period on any peer reviews            following the peer review; its review and
of OIG, unimplemented recommendations                response to our letter is ongoing.
from any peer reviews of OIG, and any peer
reviews conducted by OIG.
                                                     Investigations into Allegations
During the reporting period, the United States       of Employee Misconduct and
Nuclear Regulatory Commission Office of              Whistleblower Retaliation
Inspector General (NRC-OIG) completed a
peer review of OIG’s investigative function.         In accordance with the Inspector General Act,
On July 12, 2017, NRC-OIG issued an                  as amended, Sections 5(a)(19), (20), (22)(B),
Opinion Letter and a Letter of Observations          and 5(e), OIG is required to report certain
detailing the results of its review. In the          information regarding (1) investigations
Opinion Letter, the NRC-OIG reported that            involving senior government employees or (2)
OIG’s system of internal safeguards and              government officials found to have engaged
management procedures for our investigative          in whistleblower retaliation.
function is in compliance with the quality
standards established by the CIGIE and the           Sections 5(a)(19) and 5(e)(1) of the Inspector
applicable Attorney General guidelines. In the       General Act, as amended, require that OIG
Letter of Observations, NRC-OIG recognized           report—to the extent that public disclosure
OIG for employing five “best practices” in its       of the information is not prohibited by law
investigative operations.                            (e.g., the Privacy Act of 1974)—on each



118     Federal Housing Finance Agency Offce of Inspector General
investigation it conducted involving a senior      contained information which is privileged,
government employee when allegations of            confidential, or could be used to circumvent
misconduct were substantiated. OIG does not        FHFA’s internal controls, and, accordingly,
have any reportable information during the         OIG has not publicly disclosed such contents.
applicable time frame.

Sections 5(a)(20) and 5(e)(1) of the Inspector
                                                   Interference with
General Act, as amended, require that OIG          Independence
report—to the extent that public disclosure of
the information is not prohibited by law (e.g.,    Section 5(a)(21) of the Inspector General
the Privacy Act of 1974)—on any instance of        Act, as amended, requires that OIG report
whistleblower retaliation by an official found     any attempt by FHFA to interfere with the
to have engaged in retaliation. OIG does not       independence of the office, including through
have any reportable information during the         budget constraints designed to limit OIG’s
applicable time frame.                             capabilities and resistance or objection to
                                                   OIG’s oversight activities or restricting or
Sections 5(a)(22)(B) and 5(e)(1) of the            significantly delaying access to information.
Inspector General Act, as amended, require         OIG does not have any reportable information
that OIG report—to the extent that public          during the applicable time frame.
disclosure of the information is not prohibited
by law (e.g., the Privacy Act of 1974)—
on each investigation involving a senior
government employee that is closed and was
not disclosed to the public. OIG does not
have any reportable information during the
applicable time frame.

Audits or Evaluations
That Were Closed and Not
Disclosed
Sections 5(a)(22)(A) and 5(e)(1) of the
Inspector General Act, as amended, require
that OIG report—to the extent that public
disclosure of the information is not prohibited
by law (e.g., the Privacy Act of 1974,
confidential supervisory information, trade
secrets)—the particular circumstances of
each inspection, evaluation, and audit OIG
conducted that is closed and was not disclosed
to the public. During this reporting period,
OIG did not close any inspection, evaluation,
or audit without disclosing the existence of
the report to the public. OIG issued several
reports during this reporting period that



                      Semiannual Report to the Congress • April 1, 2017–September 30, 2017   119
Appendix D:                                        Below are the 18 audits, evaluations,
                                                   compliance reports, management alerts,
OIG Reports                                        special reports, and white papers published
                                                   during the period. See www.fhfaoig.gov for
                                                   OIG’s reports.


                             REPORT                                             DATE
FHFA’s Examination Program for the FHLBanks’ Internal Audit
Functions Was Adequately Designed and Executed (AUD-2017-                    May 5, 2017
003)
FHFA Complied with Applicable Improper Payment Requirements
During Fiscal Year 2016 (AUD-2017-004)                                      May 10, 2017

FHFA’s Processes for General Support System Component
Inventory Need Improvement (AUD-2017-005)                                   May 25, 2017

Closure of OIG Review of FHFA’s Supervision of an Enterprise’s
Remediation of Matters Requiring Attention (ESR-2017-005)                   June 12, 2017

NPL Sales: Additional Controls Would Increase Compliance with
FHFA’s Sales Requirements (AUD-2017-006)                                    July 24, 2017

FHFA’s Compliance with its Documentary Standards for Issuing
Housing Finance Examiner Commissions (COM-2017-004)                         July 25, 2017

FHFA Should Improve its Administration of the Suspended
Counterparty Program (COM-2017-005)                                         July 31, 2017

The Gap in FHFA’s Quality Control Review Program Increases the
Risk of Inaccurate Conclusions in its Reports of Examination of           August 17, 2017
Fannie Mae and Freddie Mac (EVL-2017-006)
Existing Statutory Capital Requirements for Fannie Mae and
Freddie Mac (WPR-2017-001)                                                August 17, 2017

Performance Audit of the Federal Housing Finance Agency’s
(FHFA) Privacy Program (AUD-2017-007)                                     August 30, 2017

Fannie Mae and Freddie Mac in the Multifamily Market (WPR-
2017-002)                                                                September 7, 2017

Compliance Review of FHFA’s Revised Process for Reviewing the
Enterprises’ Annual Operating Budgets (COM-2017-006)                    September 19, 2017

FHFA’s 2015 Report of Examination to Fannie Mae Failed to
Follow FHFA’s Standards Because it Reported on an Incomplete
Targeted Examination of the Enterprise’s New Representation and September 22, 2017
Warranty Framework (AUD-2017-008)




120   Federal Housing Finance Agency Offce of Inspector General
                           REPORT                                             DATE
FHFA’s 2015 and 2016 Supervisory Activities, as Planned,
Addressed Identifed Risks with Freddie Mac’s New                      September 22, 2017
Representation and Warranty Framework (AUD-2017-009)
Management Alert: Need for Increased Oversight by FHFA,
as Conservator, to Ensure that Freddie Mac’s Policies and
Procedures for Resolution of Executive Offcer Conficts of Interest September 27, 2017
Align with the Responsibilities of the Nominating and Governance
Committee of the Freddie Mac Board of Directors (OIG-2017-005)
FHFA Failed to Complete Non-MRA Supervisory Activities Related
to Cybersecurity Risks at Fannie Mae Planned for the 2016             September 27, 2017
Examination Cycle (AUD-2017-010)
FHFA Did Not Complete All Planned Supervisory Activities Related
to Cybersecurity Risks at Freddie Mac for the 2016 Examination September 27, 2017
Cycle (AUD-2017-011)
Special Report: Update on FHFA’s Oversight of Fannie Mae’s
Build-Out of its Newly Leased Class A Offce Space in Midtown          September 28, 2017
Center (COM-2017-007)




                   Semiannual Report to the Congress • April 1, 2017–September 30, 2017   121
Appendix E:                                           In these types of schemes, the sellers
                                                      or developers wrongfully conceal from
OI Publicly Reportable                                prospective lenders the incentives they’ve
                                                      offered to investors and the true value of
Investigative Outcomes                                the properties. The lenders, acting on this
                                                      misinformation, make loans that are far riskier
Involving Condo                                       than they have been led to believe. Such loans
                                                      often default and go into foreclosure, causing
Conversion and Builder                                the lenders to suffer large losses.
Bailout Schemes


 DEFENDANT                  ROLE              MOST RECENT ACTION                        DATE
Sentencings of Real Estate Professionals in $39 Million Builder Bailout Fraud,
Florida
This scheme involves the sale of multiple condominium conversion properties and numerous
mortgage brokers, real estate agents, and settlement agents across southern and central Florida The
investigation has documented 165 transactions involving multiple co-conspirators and over $39 million
in mortgage loans
                      Real Estate Broker/    Ordered to pay $465,857 in
                      President of Real      restitution; sentenced to 33         September 25, 2017,
Ivan Peralta
                      Estate Brokerage       months in prison and 2 years of        & July 14, 2017
                      Business               supervised release
                                             Ordered to pay $465,857 in
                      President of
                                             restitution; sentenced to 27         September 25, 2017,
Rosario Peralta       Mortgage Brokerage
                                             months in prison and 2 years of        & July 14, 2017
                      Business
                                             supervised release
                                             Sentenced to 12 months of home
Dagoberto                                    confnement, 5 years of probation,
                      Real Estate Agent                                              June 27, 2017
Rodriguez                                    and ordered to pay $383,788 in
                                             restitution, joint and several
                                             Amended judgment fled ordering
Maria del Carmen
                      Straw Buyer            $465,857 in restitution, joint and      April 24, 2017
Rodriguez
                                             several




122     Federal Housing Finance Agency Offce of Inspector General
 DEFENDANT                   ROLE              MOST RECENT ACTION                          DATE

Sentencing and Trial Acquittal in Condominium Fraud Scheme, Florida
Co-conspirators facilitated the sale of condominiums to straw buyers at infated prices, then paid
undisclosed incentives and caused false documentation to be submitted to fnancial institutions in
order to qualify buyers for loans for which they otherwise would not have qualifed A co-conspirator
allegedly wired the closing proceeds to a shell company that disbursed the undisclosed incentives to
the participants of the transaction in an attempt to further conceal the payments from lenders and
regulators
Rebecca Gheiler       Former President        Acquitted at trial                      September 7, 2017
                                              Sentenced to time served, 3 years
                                              of supervised release, and ordered
Osbel Sanchez         Sales Associate         to pay $322,167 in restitution, joint     April 24, 2017
                                              and several Previously ordered to
                                              pay $40,000 in forfeiture




 DEFENDANT                   ROLE              MOST RECENT ACTION                          DATE
Nine Sentenced, Two Plead Guilty, and Nine Charged in Condominium Bank
Fraud Scheme, Florida
Co-conspirators enriched themselves by using straw buyers and unqualifed buyers to purchase and
fnance residential properties To do this, the co-conspirators submitted loan applications and other
documents to lenders containing materially false statements The Enterprises purchased several loans
involved in this fraud scheme
                                              Ordered to pay $2,723,974 in
                      Vice President of Title restitution, joint and several;         September 5, 2017,
Pedro Allende
                      Company                 sentenced to 38 months in prison         & May 10, 2017
                                              and 3 years of supervised release
                                              Ordered to pay $2,723,974 in
                      Director/President of   restitution, joint and several;         September 5, 2017,
Mirna Pena
                      Title Company           sentenced to 27 months in prison         & May 10, 2017
                                              and 3 years of supervised release
                                              Ordered to pay $1,068,987 in
                                              restitution, joint and several;
                      Real Estate Sales                                               September 1, 2017,
Eduardo Cruz Toledo                           sentenced to 1 year and 1 day in
                      Associate/Recruiter                                              & June 23, 2017
                                              prison and 5 years of supervised
                                              release
                                              Ordered to pay $1,626,304 in
                                              restitution, joint and several;
                      Marketing Company                                                August 30, 2017,
Jorge Sola                                    sentenced to 1 year and 1 day in
                      Operator                                                         & May 26, 2017
                                              prison and 5 years of supervised
                                              release
                                              Ordered to pay $563,894 in
                                              restitution, joint and several;
                                                                                       August 29, 2017,
Jose Salazar          Straw Buyer             sentenced to 1 year and 1 day in
                                                                                       & June 23, 2017
                                              prison and 5 years of supervised
                                              release


                      Semiannual Report to the Congress • April 1, 2017–September 30, 2017             123
                                             Sentenced to 1 year and 1 day in
Cynthia Velasquez     Straw Buyer            prison and 5 years of supervised      August 25, 2017
                                             release
                                             Ordered to pay $1,134,871 in
                      Marketing Company      restitution, joint and several;       August 23, 2017,
Herberto Gamboa                              sentenced to 24 months in prison
                      Operator                                                      & June 2, 2017
                                             and 3 years of supervised release
                                             Charged by superseding indictment
                      Acting Manager/        with bank fraud and conspiracy to
Miguel Soto, Jr                                                                    August 8, 2017
                      Recruiter              commit bank fraud and wire fraud
                                             Charged by superseding indictment
                      Director of Sales/     with bank fraud and conspiracy to
Hector Santana                                                                     August 8, 2017
                      Recruiter              commit bank fraud and wire fraud
                                             Charged by superseding indictment
Barbara Zas           Recruiter              with bank fraud and conspiracy to     August 8, 2017
                                             commit bank fraud and wire fraud

                      President of Mortgage Charged by superseding indictment
Maria Diaz            Brokerage Business/ with bank fraud and conspiracy to        August 8, 2017
                      Recruiter             commit bank fraud and wire fraud
                                             Charged by superseding indictment
                      President of Title     with bank fraud and conspiracy to
Barbara Camayd                                                                     August 8, 2017
                      Company                commit bank fraud and wire fraud
                                             Charged by superseding indictment
                      Marketing Company      with bank fraud and conspiracy to
Jenny Nillo                                                                        August 8, 2017
                      Operator/Recruiter     commit bank fraud and wire fraud
                                             Charged by superseding indictment
Jaime Sola Avila      Recruiter              with bank fraud and conspiracy to     August 8, 2017
                                             commit bank fraud and wire fraud
                                             Charged by superseding indictment
                      Real Estate Broker/    with bank fraud and conspiracy to
Emily Echavarria                                                                   August 8, 2017
                      Recruiter              commit bank fraud and wire fraud
                                             Charged by superseding indictment
Yipsy Clavelo         Straw Buyer            with bank fraud and conspiracy to     August 8, 2017
                                             commit bank fraud and wire fraud
                                             Sentenced to 8 months in prison and
Carlos Mesa, Jr       Straw Buyer            5 years of supervised release          July 28, 2017

                                             Sentenced to 5 months in prison,
                                             5 years of supervised release,
Michael Gonzalez      Straw Buyer            and ordered to pay $257,538 in         July 28, 2017
                                             restitution, joint and several
                                             Pled guilty to conspiracy to commit
Yanet Huet            Straw Buyer            bank fraud and wire fraud and bank     July 24, 2017
                                             fraud

                      Marketing Company      Pled guilty to conspiracy to commit
Miguel Faraldo                               bank fraud and wire fraud              June 16, 2017
                      Operator/Recruiter




124     Federal Housing Finance Agency Offce of Inspector General
 DEFENDANT                   ROLE              MOST RECENT ACTION                         DATE

Sentencing of Real Estate Agent in Property Flipping Scheme, Tennessee
Co-conspirators engaged in a property fipping scheme wherein straw buyers were paid undisclosed
incentives to purchase houses At one time, the Enterprises owned three of the 10 properties involved in
this scheme
                                              Sentenced to 30 months in prison,
                                              3 years of supervised release,
Thomas Boyd           Real Estate Agent                                               August 23, 2017
                                              and ordered to pay $383,375 in
                                              restitution




 DEFENDANT                   ROLE              MOST RECENT ACTION                         DATE
Sentencing of Mortgage Broker and Guilty Plea of Owner in Condominium
Scheme, Florida
Co-conspirators sold condominium units to unqualifed buyers by offering undisclosed incentives, and
prepared and submitted false and fctitious loan documents to fnancial institutions to facilitate the
sales
                                              Sentenced to 3 years of
Scot Rounds           Mortgage Broker         supervised release and ordered to      August 22, 2017
                                              pay $602,730 in restitution
Brian Allard          Owner/Developer         Pled guilty to bank fraud                May 22, 2017




 DEFENDANT                   ROLE              MOST RECENT ACTION                         DATE
Forty-Year Prison Sentence for Former CFO of Cay Clubs and Sentencing of
Former JPMorgan Chase Bank Senior Loan Ofcer, Florida
Cay Clubs Resorts, which operated resort-style hotels/condominiums throughout the United States,
operated as a massive Ponzi and securities fraud scheme The scheme defrauded 1,400 investors,
FDIC-insured banks, and the Enterprises out of over $300 million The scheme caused a loss to Freddie
Mac of $8,390,663 and to Fannie Mae of $2,850,086

                                              Sentenced to 36 months in prison,
                                              3 years of supervised release,
                      Former Senior Loan
Ross Pickard                                  and ordered to pay $33,330,503         August 17, 2017
                      Offcer
                                              in restitution and $470,484 in
                                              forfeiture
                                              Ordered to pay $181,445,179
                                              in restitution, joint and several;
                                              ordered to pay $303,439,754             July 10, 2017,
                      Former Cay Clubs
David Schwarz                                 in forfeiture, joint and several;        May 9, 2017,
                      Owner/CFO
                                              sentenced to 480 months in              & May 4, 2017
                                              prison and 5 years of supervised
                                              release




                       Semiannual Report to the Congress • April 1, 2017–September 30, 2017            125
 DEFENDANT                   ROLE             MOST RECENT ACTION                         DATE

Guilty Plea in Builder Bailout Scheme, Illinois
Co-conspirators participated in a mortgage fraud scheme through the marketing and sales of
condominiums by making false promises to buyers regarding various fnancial incentives The co-
conspirators also deceived lenders by concealing material facts in order to fraudulently induce the
lenders to approve non-conforming loans to unqualifed buyers The fraud scheme caused more than
$14 7 million in losses with approximately $1 3 million in losses to the Enterprises

                      Director of Contract
Nunzio Grieco                                Pled guilty to false statements         August 4, 2017
                      Administration




 DEFENDANT                   ROLE             MOST RECENT ACTION                        DATE

Three Charged in Bank Fraud Scheme, Texas

Brett Immel, a partner in a business called Hanover Companies, located investors to purchase homes
from builders in exchange for a fee Immel allegedly directed home buyers to Wright and Bomar to assist
with obtaining mortgages The three co-conspirators allegedly prepared two versions of documents
representing the mortgage transactions  The frst set of documents, provided to the builder, included
payments received by Hanover Companies for locating investors The second set, which was provided
to lenders, omitted the payments to Hanover Companies and overinfated the sellers’ profts, purchase
price, and the amount of funds needed by the buyer to purchase the property Lenders allegedly relied
on the false documentation and wired funds to accounts controlled by Wright and Bomar, who then paid
kickbacks to Hanover Companies Allegedly, of the more than $11 million in loan proceeds, over $3 8
million were undisclosed payments to Hanover Companies The Enterprises secured mortgages on 64 of
the 66 properties identifed in this investigation

                                             Charged by superseding
                      Partner at Hanover
Brett Immel                                  indictment with conspiracy to           July 12, 2017
                      Companies
                                             commit bank fraud
                                             Charged by superseding
James Wright          Title Attorney         indictment with conspiracy to           July 12, 2017
                                             commit bank fraud
                                             Charged by information with
Daniel Bomar          Escrow Offcer                                                  May 16, 2017
                                             conspiracy to commit bank fraud




126    Federal Housing Finance Agency Offce of Inspector General
 DEFENDANT                   ROLE              MOST RECENT ACTION                         DATE

Title Company Owner Sentenced in Builder Bailout Scheme, Florida
Patricia Lynn Smith raised funds from a complicit investor to close numerous home purchases by straw
buyers using fraudulent loan applications The investor funds were used primarily to fund the borrow-
ers’ cash to close for the loans Smith used the loan proceeds to pay the recruiters of the straw buy-
ers and to repay the investor his funds, plus a commission for his role The investor then paid Smith a
kickback fee for facilitating the transaction The Enterprises suffered a combined loss of approximately
$1,175,248 because of this scheme
                                              Sentenced to 3 years of probation
                                              with 6 months’ home confnement
Patricia Lynn Smith   Title Company Owner                                             June 15, 2017
                                              and ordered to pay $3,733,877 in
                                              restitution




 DEFENDANT                   ROLE              MOST RECENT ACTION                         DATE
Indictment of Straw Buyer and Guilty Pleas of Real Estate Professional and
Mortgage Company Manager in Condominium Conversion Fraud Scheme,
Florida
Co-conspirators allegedly marketed and sold condominium units at a condo conversion project known as
The Preserves, by offering potential buyers incentives that were not disclosed to lenders, and preparing
and submitting loan applications containing material misrepresentations

                                              Pled guilty to conspiracy to commit
Alejandro Tobon       Branch Manager                                                   June 9, 2017
                                              bank and wire fraud
                      Real Estate Sales       Pled guilty to conspiracy to commit
Carlos Escarria                                                                       May 30, 2017
                      Associate               bank and wire fraud
                                              Charged by superseding
                                              indictment with conspiracy to
Joaquin Cadavid       Straw Buyer             commit bank fraud, bank fraud,          May 25, 2017
                                              and wire fraud affecting a fnancial
                                              institution




                       Semiannual Report to the Congress • April 1, 2017–September 30, 2017           127
Appendix F:                                             Loan or mortgage origination schemes are
                                                        the most common type of mortgage fraud.
OI Publicly Reportable                                  They typically involve falsifying borrowers’
                                                        income, assets, employment histories, and
Investigative                                           credit profiles to make them more attractive
Outcomes Involving                                      to lenders. Perpetrators often employ
                                                        bogus Social Security numbers and fake or
Loan Origination                                        altered documents, such as W-2s and bank
                                                        statements, to cause lenders to make loans
Schemes                                                 they would not otherwise make.




 DEFENDANT                    ROLE              MOST RECENT ACTION                          DATE

Sentencings and Guilty Plea in Loan Origination Fraud Scheme, New Jersey
Co-defendants defrauded numerous lenders by using stolen identities to create the hallmarks of a
legitimate residential mortgage or HELOC transaction, complete with a borrower/buyer, seller, title company,
homeowner’s insurance company, closing attorney, and other parties By creating the illusion of a legitimate
transaction, unsuspecting lenders were deceived into disbursing loan proceeds to a bank account opened
in the name of a fraudulent title company or fctitious law frm The loan proceeds were then withdrawn
by the co-defendants who made repeated fraudulent withdrawals at multiple ATMs and bank branches At
least seven properties are involved in this scheme with overall losses in excess of $900,000 Fannie Mae
suffered losses
                                               Sentenced to 5 years of probation
Laquan Jones           Participant             and ordered to pay $6,000 in resti- September 28, 2017
                                               tution
Artis Hunter           Participant             Sentenced to 10 years in prison         August 11, 2017
                                               Pled guilty to fnancial facilitation
Melissa Phillip        Participant             of criminal activity in the third         April 28, 2017
                                               degree




 DEFENDANT                    ROLE              MOST RECENT ACTION                          DATE

Indictment of Loan Processor at Mortgage Brokerage, Illinois
While working as a loan processor, Amber Cook allegedly participated in a scheme to defraud lenders by
including materially false information regarding assets and income in loan applications, at times creat-
ing false documents to support the false loan applications Losses to the Enterprises from this alleged
scheme are in excess of $1 8 million
                                               Charged by indictment with bank
Amber Cook            Loan Processor                                                    August 24, 2017
                                               fraud and false statements




128     Federal Housing Finance Agency Offce of Inspector General
 DEFENDANT                     ROLE             MOST RECENT ACTION                         DATE

Guilty Trial Verdict and Guilty Pleas in Loan Origination Scheme, New York
Co-conspirators recruited straw buyers to purchase properties using fraudulent mortgage loan applica-
tions in exchange for a fee The loan applications misstated the borrowers’ incomes, employment his-
tories, and amounts of money in their bank accounts In addition, the co-conspirators provided fctitious
documents and falsifed bank statements to support the misrepresentations made on the loan applica-
tions The loans on the properties defaulted, resulting in losses of over $240,000 to Freddie Mac and
another fnancial institution
                                              Found guilty at trial of conspiracy
Nimboko Miller          Recruiter             to commit bank fraud and bank             July 17, 2017
                                              fraud
                                              Pled guilty to conspiracy to commit
Christopher Scott, Jr   Participant                                                     May 30, 2017
                                              bank fraud
                                              Pled guilty to conspiracy to commit
Christopher Scott, Sr   Participant                                                     May 17, 2017
                                              bank fraud




 DEFENDANT                     ROLE            MOST RECENT ACTION                          DATE

Sentencings in Multi-Defendant Origination Scheme, Illinois
The co-defendants, along with others, participated in a scheme to defraud lenders of mortgage loans,
federal student loans, and small business loans The participants in the scheme used their own identi-
ties and the personal information of identity theft victims to commit the fraud, which involved submitting
false documents to lenders and using straw buyers to obtain loans The loss exposure to the Enterpris-
es was nearly $1 million
                                              Sentenced to 33 months in prison,
                                              1 year of supervised release, and
Anthony Trice           Participant                                                     June 28, 2017
                                              ordered to pay $398,211 in resti-
                                              tution, joint and several
                                              Sentenced to 39 months in prison,
                                              2 years of supervised release,
Jerrod Weathersby       Participant                                                     June 27, 2017
                                              and ordered to pay $398,211 in
                                              restitution, joint and several




                        Semiannual Report to the Congress • April 1, 2017–September 30, 2017            129
 DEFENDANT                     ROLE               MOST RECENT ACTION                            DATE

Two Indicted in Loan Origination Fraud Scheme, Florida
Lazaro Rojas and Adrian Diaz De Villegas allegedly recruited unqualifed straw buyers to purchase residential
properties Rojas, a loan offcer, and Diaz de Villegas, his business partner, prepared, or caused to be prepared,
mortgage loan applications and related documents that contained false and fraudulent information, including
the straw buyers’ employment, income, assets, and occupancy intent In addition, Rojas and Diaz De Villegas
provided the straw buyers “cash to close” and offered kickbacks to them that were not disclosed to the lenders
After the closings, many of the straw buyers/co-conspirators failed to pay their mortgages and the properties
subsequently went into default As a result of this scheme, Fannie Mae and others suffered losses
                                                 Charged by indictment with conspir-
                                                 acy to commit bank fraud and wire
Adrian Diaz De
                        Participant              fraud affecting a fnancial institu-         June 20, 2017
Villegas
                                                 tion, bank fraud, and wire fraud
                                                 affecting a fnancial institution
                                                 Charged by indictment with conspir-
                                                 acy to commit bank fraud and wire
Lazaro Rojas            Loan Offcer              fraud affecting a fnancial institu-         June 20, 2017
                                                 tion, bank fraud, and wire fraud
                                                 affecting a fnancial institution




 DEFENDANT                     ROLE               MOST RECENT ACTION                            DATE
Guilty Plea of Attorney/Title Company Owner in Bank Fraud Scheme,
Massachusetts
Margaret Connolly, owner and operator of Madison Title Company, defrauded lenders by obtaining multiple
mortgages for her residence To make it appear that the property she was using as security was unencumbered,
Connolly submitted fraudulent loan applications and fctitious title reports to lenders In connection with
the associated mortgage loan applications, Connolly misstated her personal assets, claimed to own properties
she did not, understated her liabilities, and misrepresented her and her husband’s employment income Relying
on these misrepresentations, lenders were defrauded into providing over $2 million in mortgages
                        Attorney/Title
Margaret Connolly                                Pled guilty to bank fraud                  June 15, 2017
                        Company Owner




 DEFENDANT                     ROLE               MOST RECENT ACTION                             DATE

Sentencing of Loan Ofcer in Straw Buyer Scheme, Illinois

Nicholas Burge, a loan offcer, conspired with others to aid straw buyers to fraudulently obtain at least
fve mortgage loans valued at approximately $1 49 million by making materially false representations in
documents submitted to lenders Soon after the properties were sold to the straw buyers, the mortgag-
es went into default The fraud resulted in approximately $800,000 in losses to the Enterprises

                                                 Sentenced to 48 months in prison,
                                                 2 years of supervised release,
Nicholas Burge          Loan Offcer                                                          June 14, 2017
                                                 and ordered to pay $1,335,248 in
                                                 restitution

130     Federal Housing Finance Agency Offce of Inspector General
 DEFENDANT                   ROLE              MOST RECENT ACTION                         DATE

Guilty Plea of Title Company Owner, Missouri
Adair County Title & Escrow (ACTE), owned and operated by Nancy Porter, contracted with Stewart Title,
a title insurance guarantee company, to sell title insurance policies underwritten by Stewart Title to
home buyers Eventually, Stewart Title terminated its contract with ACTE Nonetheless, ACTE continued
to sell title insurance policies purportedly underwritten by Stewart Title to home buyers ACTE charged
customers for these fraudulent policies and collected and retained the fees it obtained In total, ACTE
closed approximately 527 fraudulent transactions resulting in approximately $419,000 in fees
                                              Charged by information and pled
Nancy Porter          Title Company Owner                                              June 7, 2017
                                              guilty to wire fraud




 DEFENDANT                   ROLE              MOST RECENT ACTION                         DATE

Licensed Real Estate Agent/Loan Broker Sentenced, California
Lynn Maina, a licensed real estate agent, prepared and submitted to mortgage lenders a number of
false documents, including fraudulent loan applications and falsifed letters to explain away problems
with credit histories and fabricated credit reports Freddie Mac owned at least fve loans associated with
Maina’s scheme, and incurred losses of approximately $1 million
                                              Sentenced to 4 months in prison,
                                              3 years of supervised release,
Lynn Maina            Real Estate Agent                                                April 17, 2017
                                              and ordered to pay $2,246,600 in
                                              restitution




 DEFENDANT                   ROLE              MOST RECENT ACTION                         DATE

Indictment of Attorney and Loan Ofcer in Mortgage Fraud Scheme, Illinois
Jessica Arong O’Brien allegedly fraudulently caused lenders to provide approximately $1 4 million
in mortgage and commercial loans through false representations and concealing material facts in
documents submitted to the lenders, such as the buyer’s income, employment, liabilities, intent to
occupy, identity, cash to close, and sale price O’Brien then allegedly used the fraudulently obtained
mortgage loan proceeds to purchase or refnance mortgages on investment properties and obtain a
commercial line of credit to maintain the properties, before selling them to Maria Bartko and a straw
buyer whom O’Brien knew would not qualify for a mortgage loan unless under fraudulent pretenses
                                              Charged by indictment with mail
Maria Bartko          Loan Offcer             fraud affecting a fnancial institu-      April 11, 2017
                                              tion
                      Attorney/               Charged by indictment with mail
Jessica Arong
                      Loan Offcer/            fraud affecting a fnancial institu-      April 11, 2017
O’Brien
                      Real Estate Agent       tion and bank fraud




                       Semiannual Report to the Congress • April 1, 2017–September 30, 2017             131
Appendix G:                                              Short sales occur when a lender allows a
                                                         borrower who is “underwater” on his/her
OI Publicly Reportable                                   loan—that is, the borrower owes more than
                                                         the property is worth—to sell his/her property
Investigative                                            for less than the debt owed. Short sale fraud
Outcomes Involving                                       usually involves a borrower who intentionally
                                                         misrepresents or fails to disclose material facts
Short Sale Schemes                                       to induce a lender to agree to a short sale.



 DEFENDANT                    ROLE               MOST RECENT ACTION                           DATE

Three Charged in a Buy-and-Bail Short Sale Scheme, Michigan

Co-conspirators allegedly operated a buy-and-bail scheme through Elias Realty  Through extensive advertising,
the co-conspirators contacted struggling homeowners and promised to help the homeowners sell their homes,
eliminate their debt, and buy new homes To accomplish this, the co-conspirators advised the homeowners
to buy a second home and facilitated the submission of mortgage applications Allegedly, the mortgage
applications for the second homes falsely infated the values of the frst homes and misrepresented that the
borrowers intended to keep their existing homes as rental properties In reality, however, the homes were worth
signifcantly less than stated in the mortgage applications, and the homeowners had no intention of renting
their homes; rather, they intended to sell them by short sale Once the second homes were purchased, the
co-conspirators allegedly instructed the homeowners to stop making mortgage payments on the frst homes
and assisted the homeowners with short sale applications submitted to their lenders for their original
properties given the fnancial hardships due to having two active mortgages Many homeowners were permitted
to conduct short sales and lenders forgave the difference between the short sale prices and the outstanding
amount of the loans In some instances, however, the fnancial institutions did not agree to the short sales
and the mortgages were foreclosed Estimated losses to the Enterprises are more than $4 million

                                                Charged by indictment with
                                                conspiracy to commit bank
                                                fraud; falsifcation of records in a
                       Business Owner/          federal investigation, aiding and
William Elias                                                                            August 29, 2017
                       Real Estate Broker       abetting; bank fraud; conspiracy
                                                to commit money laundering;
                                                money laundering; HUD
                                                transactions fraud
                                           Charged by indictment with
                                           conspiracy to commit bank
                                           fraud; falsifcation of records in a
                       Processing Manager/
                                           federal investigation, aiding and
Kimberly Doren         Real Estate                                                       August 29, 2017
                                           abetting; bank fraud; conspiracy
                       Salesperson
                                           to commit money laundering;
                                           money laundering; HUD
                                           transactions fraud
                                                Charged by indictment with
                                                conspiracy to commit bank
                       Real Estate
Daniel Trubak                                   fraud; falsifcation of records in a      August 29, 2017
                       Salesperson
                                                federal investigation, aiding and
                                                abetting



132     Federal Housing Finance Agency Offce of Inspector General
 DEFENDANT                   ROLE              MOST RECENT ACTION                         DATE

Sentencing of Buyer in Short Sale Fraud Scheme, California
Mahendra Prasad submitted a loan application containing material misstatements to purchase a proper-
ty The application included false statements concerning his employment, income, and intent to occupy
the property as his primary residence Instead of residing in the property, Prasad rented the property and
collected rental payments Later, Prasad engaged in a fraudulent short sale transaction by submitting
false documentation to the lender, including a fraudulently signed arm’s length affdavit claiming he had
no relationship to the buyer, when in fact the buyer was a co-conspirator This short sale fraud scheme
involved at least 25 properties, some of which were owned by the Enterprises, and caused losses to
lenders of at least $3 million
                                              Ordered to pay $328,000 in for-
                                              feiture; sentenced to 15 months
                                              in prison, 5 years of supervised       August 21, 2017,
Mahendra Prasad       Participant
                                              release, and ordered to pay           & August 14, 2017
                                              $328,000 in restitution, joint and
                                              several




 DEFENDANT                   ROLE              MOST RECENT ACTION                         DATE

Sentencings in Complex Short Sale Fraud Scheme, California
Conspirators engaged in several schemes to fraudulently obtain money, including: a “fopping” scheme
where banks were convinced to accept short sale prices that were lower than a legitimate buyer would
be willing to pay; recording false second and third liens; tricking distressed homeowners into signing
their properties over to criminal actors; and renting distressed properties while simultaneously stalling
foreclosure through the use of fraudulent documents The Enterprises, as owners of the mortgages on at
least eight of the properties, suffered losses
                                           Sentenced to 2 years in prison
                      Notary/Licensed Real
Brian Deden                                and ordered to pay $300 in                  July 25, 2017
                      Estate Broker
                                           restitution
                                              Sentenced to 16 years and 8
                      Licensed Real Estate    months in prison, $140,754 in
Eric Wolfe                                                                             July 21, 2017
                      Broker                  restitution, and $500,000 in
                                              forfeiture




                       Semiannual Report to the Congress • April 1, 2017–September 30, 2017            133
 DEFENDANT                    ROLE              MOST RECENT ACTION                          DATE

Sentencing in Short Sale Fraud Scheme, Michigan
David Hill defaulted on his Freddie Mac-owned mortgage and conspired with a co-defendant who had
experience in the mortgage industry to negotiate a short sale on his behalf with the lender In violation of
the short sale agreement, the property was subsequently sold to Hill’s uncle and Hill and the co-defendant
continued to live in the house for at least two years Freddie Mac suffered over $34,000 in losses
                                               Sentenced to 2 years of probation
David Hill             Participant             and ordered to pay $34,552 in             June 13, 2017
                                               restitution, joint and several




 DEFENDANT                    ROLE              MOST RECENT ACTION                          DATE

Guilty Plea of Title Company Owner, Maryland
Marla Messenger, acting as the settlement agent for both sides of real estate transactions, along with
co-conspirators, purchased short sale properties using straw buyers, then immediately resold the proper-
ties at signifcantly higher prices to fnal buyers on or about the same date

                                               Pled guilty to conspiracy to com-
                                               mit bank fraud, mail fraud, and
Marla Messenger        Title Company Owner                                               May 25, 2017
                                               wire fraud affecting a fnancial
                                               institution




134     Federal Housing Finance Agency Offce of Inspector General
Appendix H:                                          These schemes prey on homeowners.
                                                     Businesses typically advertise that they can
OI Publicly Reportable                               secure loan modifications if the homeowners
                                                     pay significant upfront fees or take other
Investigative                                        action that enriches the defendant. Typically,
                                                     these businesses take little or no action,
Outcomes Involving                                   leaving homeowners in a worse position.

Loan Modifcation and
Property Disposition
Schemes


 DEFENDANT                  ROLE             MOST RECENT ACTION                        DATE

Sentencing of Loan Scheme Operator, California
Kevin Rasher admitted he falsely told distressed homeowners that he was an employee of the
government or that he was an attorney, and that the homeowners had been approved for a reduced
mortgage payment or interest rate Rasher then instructed the homeowners to mail their mortgage
payments to one of his businesses, claiming he would forward the money to the homeowners’ mortgage
lenders Instead of forwarding the money to the mortgage lenders, Rasher deposited the money into his
bank accounts and used it for his own personal expenses Included in the overall scheme were loans
owned by the Enterprises
                                            Sentenced to 97 months in prison,
                                            3 years of supervised release,
Kevin Rasher         Operator                                                   September 29, 2017
                                            and ordered to pay $2,240,526 in
                                            restitution




 DEFENDANT                  ROLE             MOST RECENT ACTION                        DATE

Guilty Plea of Fictitious Loan Ofcer, Maryland
Se Chang Moon posed as a loan offcer and obtained over $350,000 in funds from one victim who
believed Moon was using the money to refnance the victim’s mortgage Moon, however, stole the money
and used it for his personal beneft Moon also victimized other potential customers by stealing their
identities and opening bank accounts and obtaining loans in their names without their knowledge Total
losses associated with this scheme are in excess of $650,000
                                            Sentenced to 39 months in prison,
                                            5 years of supervised release, and
Se Chang Moon        Fictitious Loan Offcer                                    September 19, 2017
                                            ordered to pay $652,542 in resti-
                                            tution and $499,937 in forfeiture




                      Semiannual Report to the Congress • April 1, 2017–September 30, 2017        135
 DEFENDANT                     ROLE            MOST RECENT ACTION                          DATE
Restitution Ordered and Five Sentenced in $10 Million Nationwide Loan
Modifcation Scheme, Virginia
The co-defendants, along with others, devised a scheme to obtain upfront payments from victims
by leading them to believe they were receiving federally funded home loan modifcations under a
government program The scheme victimized hundreds of homeowners out of more than $10 million,
resulting in an estimated $3 8 million in losses and approximately $1 1 million in potential losses to the
Enterprises
                                              Ordered to pay $9,059,002 in
                      Customer Service        restitution, joint and several;   September 14, 2017,
Michael Henderson
                      Representative          sentenced to 144 months in prison   & July 19, 2017
                                              and 3 years of supervised release
                                              Ordered to pay $10,226,285
                                              in restitution, joint and several;
                                                                                      August 16, 2017,
Sammy Araya           Business Operator       sentenced to 240 months in prison
                                                                                       & July 19, 2017
                                              and 36 months of supervised
                                              release
                                              Ordered to pay $10,186,351
                                              in restitution, joint and several;
                                                                                      August 16, 2017,
Jen Seko              Business Operator       sentenced to 84 months in prison
                                                                                       & July 19, 2017
                                              and 36 months of supervised
                                              release
                                              Sentenced to 80 months in prison,
                                              3 years of supervised release,
                                              and ordered to pay $3,642,367
Nicholas Estilow      Closer                                                            June 1, 2017
                                              in restitution and $9 3 million in
                                              forfeiture; both ordered joint and
                                              several
                                              Sentenced to 60 months in prison,
                                              3 years of supervised release,
                      Customer Service        and ordered to pay $3,642,367
Sabrina Rafo                                                                            June 1, 2017
                      Representative          in restitution and $4,528,675 in
                                              forfeiture; both ordered joint and
                                              several




 DEFENDANT                     ROLE            MOST RECENT ACTION                          DATE
Director/VP of Nonproft Pleads Guilty in Foreclosure Prevention Fraud
Scheme, Texas
Francisco Javier Gonzalez was a director and the vice president of a nonproft designed to provide
housing counseling to combat poverty Gonzalez defrauded numerous homeowners by promising to
help them obtain mortgage assistance to save their homes from foreclosure, but in reality, he made no
efforts to obtain mortgage assistance for his victims Loss calculations associated with the Enterprises
are ongoing
Francisco Javier       Director/Vice
                                              Pled guilty to mail fraud             September 12, 2017
Gonzalez               President




136     Federal Housing Finance Agency Offce of Inspector General
 DEFENDANT                    ROLE             MOST RECENT ACTION                         DATE

Plea of Consulting Company Owner, New Jersey
Jeffrey Halpern, operator of JCK Marketing, solicited business from individuals who were seeking home
loan modifcations on their residential mortgages Halpern told these individuals that, for a fee, he would
negotiate loan modifcations on their behalf In actuality, Halpern pocketed the funds but performed little
or no services in connection with the purported loan modifcations Halpern also repeatedly demanded
money for “bank fees” from his victims, even though none of the related fnancial institutions charged
fees for loan modifcations Halpern defrauded at least 26 victims of over $400,000
                                              Charged by information and pled
Jeffrey Halpern       Business Owner                                                  August 8, 2017
                                              guilty to wire fraud




 DEFENDANT                   ROLE              MOST RECENT ACTION                         DATE
Sentencing of Co-Owner and Guilty Pleas of Co-Owner and Operator in
Nationwide Loan Modifcation Scheme with More Than 10,000 Victims, Utah
The defendants conspired with others to defraud distressed homeowners and the Enterprises with a
loan modifcation scheme that affected more than 10,000 victims nationwide
                                              Sentenced to 84 months in prison,
                                              3 years of supervised release,
Chad Gettel           Co-Owner                                                        August 3, 2017
                                              and ordered to pay $590,129 in
                                              restitution, joint and several
                                              Pled guilty to conspiracy and was
Sheridan Black        Operator                sentenced to 24 months of court-         May 24, 2017
                                              supervised probation
                                              Pled guilty to conspiracy to commit
John McCall           Co-Owner                                                         May 10, 2017
                                              wire fraud and money laundering




 DEFENDANT                    ROLE             MOST RECENT ACTION                         DATE

Sentencing of Mortgage Modifcation Scheme Employee, California
Aide Orona and co-defendants operated a foreclosure rescue scheme involving the fling of false
bankruptcies, grant deeds, and other lawsuits The scheme involved more than 80 properties, and the
co-defendants received over $1 million in payments from victims The Enterprises suffered losses
                                              Sentenced to 64 months in prison
Aide Orona             Participant            and ordered to pay $90,946 in           June 29, 2017
                                              restitution, joint and several




                       Semiannual Report to the Congress • April 1, 2017–September 30, 2017          137
 DEFENDANT                    ROLE              MOST RECENT ACTION                          DATE
Guilty Plea in Multi-State Loan Modifcation Scheme with More Than 550
Victims, Kansas
Ruby Price operated the Arize Group, Incorporated (AGI), and co-defendants operated Reliant Home
Financial Group (RHFG) Together they devised a scheme to defraud homeowners with false promises
of protecting them from foreclosure In some instances, the victims would stop making their monthly
mortgage payments to their lenders and instead make payments to RHFG or AGI The co-conspirators
used the victims’ monies for personal gain
                                               Pled guilty to conspiracy to
Ruby Price             Business Owner                                                   June 27, 2017
                                               commit mail and wire fraud




 DEFENDANT                    ROLE              MOST RECENT ACTION                          DATE

Trial Conviction in Foreclosure Rescue Fraud Scheme, Maryland
Ana Gomez and co-conspirators committed loan modifcation fraud by convincing struggling homeowners
to stop making mortgage payments and communicating with their lenders Instead, the co-conspirators
instructed homeowners to make mortgage payments to companies controlled by them, with assurances
that the co-conspirators would negotiate with the victims’ lenders on their behalf to obtain modifcations
Overall scheme losses, including payments made by victims, are estimated between $1 to $2 million
                                               Found guilty at trial of mail fraud
Ana Gomez              Participant             and conspiracy to commit mail and        June 23, 2017
                                               wire fraud




 DEFENDANT                    ROLE              MOST RECENT ACTION                          DATE

Indictment in $7 Million Foreclosure-Avoidance Scheme, California
Michael “Mickey” Henschel was the alleged mastermind of a foreclosure-avoidance scam that targeted
distressed homeowners and defrauded victims of over $7 million Henschel and co-conspirators
allegedly marketed illegal foreclosure- and eviction-delay services to homeowners who had defaulted on
their mortgages and renters who were facing eviction As part of the scheme, Henschel and the others
allegedly convinced homeowners to sign fake grant deeds that purported to show the homeowners
had conveyed an interest in their property to fctional third parties Henschel and his co-conspirators
allegedly fled bankruptcies in the names of fctional persons and entities to trigger the automatic stay
provision of the Bankruptcy Code, which meant that foreclosure sales were stalled Henschel allegedly
delayed evictions in a similar way, fling fraudulent documents in state eviction actions and sending
similar documents to sheriff’s offces Henschel allegedly charged some homeowners large fees before
agreeing to clear title to their properties, in addition to the monthly fees paid for the illegal services
Preliminary loss calculations for the Enterprises are greater than $800,000 and are expected to
increase substantially
                                               Charged by indictment with
Michael “Mickey”
                       Business Operator       conspiracy, bankruptcy fraud, and         June 8, 2017
Henschel
                                               wire fraud




138     Federal Housing Finance Agency Offce of Inspector General
 DEFENDANT                    ROLE              MOST RECENT ACTION                         DATE

Sentencing in Loan Modifcation Scheme, California
Ruby Encina worked as a bookkeeper and clerical staff manager for a loan modifcation company doing
business as 21st Century  21st Century defrauded more than 4,000 fnancially distressed homeowners
of over $7 million by having them pay for services, including loan modifcations, that were never provided
The owners and employees of 21st Century contacted distressed homeowners and made numerous false
or misleading statements, including that 21st Century: (1) was operating through a federal government
program; (2) would be able to obtain new mortgages with specifc interest rates and reduced payments;
and (3) would negotiate loan modifcations with their lenders Once hired, 21st Century regularly instructed
its victims to stop making mortgage payments and to cut off all contact with their lenders because they
were being represented by 21st Century Many of these loans had been purchased by Fannie Mae and
Freddie Mac
                                               Sentenced to 12 months and 1
                      Bookkeeper/Clerical      day in prison, 1 year of supervised
Ruby Encina                                                                             June 5, 2017
                      Staff Manager            release, and ordered to pay
                                               $26,708 in restitution




                       Semiannual Report to the Congress • April 1, 2017–September 30, 2017            139
Appendix I:                                            Numerous foreclosures left the Enterprises
                                                       with an inventory of REO properties. The REO
OI Publicly Reportable                                 inventory has sparked a number of different
                                                       schemes to either defraud the Enterprises,
Investigative                                          which use contractors to secure, maintain
Outcomes Involving                                     and repair, price, and ultimately sell their
                                                       properties, or defraud individuals seeking to
Property Management                                    purchase REO properties from the Enterprises.

and REO Schemes
 DEFENDANT                     ROLE            MOST RECENT ACTION                         DATE
Four Licensed Real Estate Agent Family Members Sentenced in REO Scheme,
Arizona
Four co-defendants, all real estate agents, conspired to use trusts and the identities of others to
purchase Fannie Mae REO properties in violation of Fannie Mae rules The co-defendants spent over
$1 3 million to purchase 28 Fannie Mae REO properties
                                             Sentenced to 30 months in prison,
Daphne Iatridis       Real Estate Agent      3 years of supervised release, and     September 7, 2017
                                             ordered to forfeit 26 properties
                                             Sentenced to 30 months in prison,
Arthur Telles         Real Estate Agent      3 years of supervised release, and     September 7, 2017
                                             ordered to forfeit 26 properties
                                             Sentenced to 10 months in prison
Brendyn Iatridis      Real Estate Agent      and 12 months of supervised            September 7, 2017
                                             release
                                             Sentenced to 12 months of
Spenser Iatridis      Real Estate Agent                                             September 7, 2017
                                             probation




 DEFENDANT                     ROLE            MOST RECENT ACTION                         DATE

Husband and Wife Sentenced for Notary Public Violations, Michigan
The founder and CEO of a real estate and property management company conspired with others to
purchase and resell REO properties, some of which were owned by Fannie Mae, to foreign investors at
infated prices On many occasions, these properties were marketed as tenanted and fully refurbished
when in reality they were vacant and in a state of extreme disrepair Phillip and Sandra Hayes, licensed
notaries, assisted with this scheme
                                              Sentenced to 1 year of probation
Phillip Hayes         Notary                  and ordered to relinquish his nota-    August 24, 2017
                                              ry license
                                              Sentenced to 30 days in jail and
Sandra Hayes          Notary                  ordered to relinquish her notary         July 11, 2017
                                              license



140     Federal Housing Finance Agency Offce of Inspector General
 DEFENDANT                   ROLE             MOST RECENT ACTION                         DATE

Sentencing in Investment Fraud Scheme, Illinois

Scott Goldstein cheated would-be investors by, among other fake investment pitches, claiming he could
purchase discounted REO properties through a fctitious Enterprise program purportedly named the
“Freddie/Fannie 10 Block Purchase Program ” To support his claims, Goldstein provided some victims
with fake documents that used Freddie Mac’s letterhead Relying on Goldstein’s lies, victims “invested”
in the venture Goldstein never made the promised investments Instead, Goldstein used the victims’
money for his own beneft, to buy luxury cars and pay his mortgage, among other things

                                             Sentenced to 33 months in prison,
                      Purported CEO of       3 years of supervised release,
Scott Goldstein                                                                     August 11, 2017
                      Company                and ordered to pay $245,500 in
                                             restitution




 DEFENDANT                   ROLE             MOST RECENT ACTION                         DATE

Sentencing of Former Vice President of Inspection Company, Florida
John Franklin Coleman, III, the former vice president of operations, along with other managers of
American Mortgage Field Services, a property inspection company, directed employees to submit
thousands of fraudulent inspection reports to Bank of America and other loan servicers that paid the
company for services that did not occur The Enterprises contracted with American Mortgage Field
Services to oversee periodic inspections on properties in various stages of the foreclosure process
Losses to the Enterprises and Bank of America are in excess of $12 million
                                             Sentenced to 60 months of
                      Former Vice
John Franklin                                probation with 6 months of home
                      President of                                                    July 18, 2017
Coleman, III                                 detention, and ordered to pay a
                      Operations
                                             $5,000 fne




                      Semiannual Report to the Congress • April 1, 2017–September 30, 2017             141
Appendix J:                                           Adverse possession schemes use illegal
                                                      adverse possession (also known as “home
OI Publicly Reportable                                squatting”) or fraudulent documentation to
                                                      control distressed homes, foreclosed homes,
Investigative                                         and REO properties. In distressed property
Outcomes Involving                                    schemes, perpetrators falsely purport to assist
                                                      struggling homeowners seeking to delay or
Adverse Possession                                    avoid foreclosure. They use fraudulent tactics,
                                                      such as filing false bankruptcy petitions,
and Distressed                                        while collecting significant fees from the
                                                      homeowners.
Property Schemes


 DEFENDANT                   ROLE             MOST RECENT ACTION                           DATE

Sovereign Citizens Sentenced in Adverse Possession Scheme, Illinois
David Farr, along with others, commandeered vacant or recently foreclosed homes owned by Fannie Mae
or other lenders, which they either moved into or rented to family members Farr and Moore belonged to
the “Moors,” a group that claims not to recognize most state or federal laws In some cases, the renters
were unaware of the scheme
Torrez Moore          Sovereign Citizen     Sentenced to 11 years in prison           September 6, 2017
                                            Sentenced to 14 years in prison
David Farr            Sovereign Citizen                                                 May 22, 2017
                                            followed by 3 years of probation




 DEFENDANT                   ROLE             MOST RECENT ACTION                           DATE
Guilty Trial Verdict and Sentencing in Adverse Possession Scheme,
Washington
Naziyr Yishmael marketed a fraudulent adverse possession scheme as a legitimate way for people to
own abandoned houses facing foreclosure Yishmael assisted others in fling false paperwork in an
effort to legitimize the squatting of foreclosed homes This scheme impacted at least 11 homes

                                             Sentenced to 364 days in prison,
                                             30 days of community work pro-             April 28, 2017,
Naziyr Yishmael       Scheme Participant     gram, and 24 months of unsuper-
                                                                                       & April 20, 2017
                                             vised probation; found guilty at trial
                                             of unlawful practice of law




142    Federal Housing Finance Agency Offce of Inspector General
Appendix K:                                            In this type of scheme, traders fraudulently
                                                       manipulate the buying and selling prices of
OI Publicly Reportable                                 RMBS, causing customers to pay more to
                                                       purchase the RMBS and to receive less when
Criminal Investigative                                 they sell RMBS.
Outcomes Involving
RMBS Schemes


 DEFENDANT                   ROLE              MOST RECENT ACTION                       DATE
Guilty Trial Verdict and Guilty Plea of Former Nomura Securities Traders,
Connecticut
Frank Dinucci and Michael Gramins were formerly employed as RMBS traders at Nomura Securities
(Nomura) Dinucci, Gramins, and others conspired to misstate to customers the prices at which Nomu-
ra could or had purchased or sold bonds and whether the bonds Nomura was selling were in Nomura’s
inventory The co-conspirators made materially false representations to Nomura’s customers in order to
obtain secret and unearned compensation on RMBS trades
                      Former Executive       Found guilty at trial of conspiracy
Michael Gramins       Director/Trader of the to commit securities fraud and wire    June 15, 2017
                      RMBS Desk              fraud
                      Former VP/Trader of
Tyler Peters                                  Acquitted at trial                    June 15, 2017
                      the RMBS Desk
                      Former Managing
Ross Shapiro          Director/Trader of the Acquitted at trial                     June 15, 2017
                      RMBS Desk
                                              Charged by information and pled
                      Former VP/Trader of
Frank Dinucci                                 guilty to conspiracy to commit         April 4, 2017
                      the RMBS Desk
                                              securities and wire fraud




                      Semiannual Report to the Congress • April 1, 2017–September 30, 2017           143
Appendix L:                                            Investigations in this category involve a
                                                       variety of fraud schemes that relate to loans
OI Publicly Reportable                                 purchased by the Enterprises to finance
                                                       multifamily properties. Multifamily properties
Investigative                                          have five or more units and are primarily
Outcomes Involving                                     rental apartment communities.

Multifamily Schemes


 DEFENDANT                   ROLE              MOST RECENT ACTION                         DATE

 Sentencing in Embezzlement Scheme, Arizona
Shana Johnson worked as an accountant for a property management company in Arizona  Johnson
embezzled over $2 4 million from bank accounts associated with properties managed by her employer,
including four multifamily properties fnanced by Freddie Mac  Johnson stole the money from the
accounts, including Freddie Mac custodial accounts, by using the company’s accounts to issue
approximately 450 fraudulent checks, totaling over $1 4 million, to a relative Johnson also caused the
company to initiate nearly $1 million in unauthorized electronic transfers to pay for personal expenses
including her purchase of two cars To hide her theft, Johnson falsifed journal entries, bank statements,
bank reconciliation reports, and fnancial statements Johnson was fred after her employer discovered
the fraud Johnson then relocated to Georgia, where she became employed in a similar capacity with
another property management company Johnson engaged in the same fraudulent activity at the new
company and embezzled more than $482,960
                                             Sentenced to 44 months in prison,
                                             3 years of supervised release,
Shana Johnson         Accountant                                                   September 11, 2017
                                             and ordered to pay $2,140,333 in
                                             restitution




144    Federal Housing Finance Agency Offce of Inspector General
Appendix M:                                           Investigations in this category include a
                                                      variety of schemes involving Fannie Mae,
OI Publicly Reportable                                Freddie Mac, the FHLBanks, or members of
                                                      FHLBanks.
Investigative
Outcomes Involving
Fraud Affecting
the Enterprises,
the FHLBanks, or
FHLBank Member
Institutions


 DEFENDANT                   ROLE              MOST RECENT ACTION                         DATE
Additional Charges Filed Against Subject Who Forged Fannie Mae Exec’s
Signature in Deed Fraud Scheme and Co-Conspirator Charged, Texas
Arnoldo Antonio Ortiz allegedly forged signatures on warranty deeds, including that of a Fannie Mae
executive, and fled the deeds with the county to obtain distressed or foreclosed properties Ortiz then
allegedly conspired with Courtney Rodriguez and others and attempted to rent or sell the fraudulently
obtained properties to unwitting victims Rodriguez allegedly used proceeds from this scheme to
purchase a Cadillac Escalade for Ortiz Allegedly, Ortiz deeded two Fannie Mae properties to himself,
which caused an exposure of over $500,410 to Fannie Mae
                                             Charged by indictment with theft of
Arnoldo Antonio Ortiz Participant                                                  September 25, 2017
                                             property
                                             Charged by indictment with theft of
Courtney Rodriguez    Participant                                                  September 25, 2017
                                             property




                       Semiannual Report to the Congress • April 1, 2017–September 30, 2017          145
 DEFENDANT                   ROLE             MOST RECENT ACTION                        DATE
Sentencings of Former Bank Ofcers in Failed Member Bank Case,
Washington
PC Bank Home Loans (PCBHL) offered mortgage loans to borrowers and assisted borrowers with their
loan applications The mortgages originated by PCBHL were funded by its parent, Pierce Commercial
Bank (PCBank), which then sold the mortgages to fnancial institution investors Co-conspirators working
for PCBHL participated in a scheme to defraud PCBank and its investors by facilitating the submission
of fraudulent loan applications to PCBank Many of the loans went into default, which resulted in large
losses and contributed to the eventual failure of PCBank, a member bank of the FHLBank of Seattle
At the time of its failure, PCBank had over $17 million in outstanding advances with the FHLBank of
Seattle The Enterprises, as owners of some loans involved in this scheme, suffered additional losses
                                             Sentenced to time served, 2 years
                                             of supervised release, 30 days of
Ben Leske             Former Loan Offcer                                         September 25, 2017
                                             home detention, and ordered to
                                             pay $131,865 in restitution
                      Former Senior Loan     Sentenced to 1 year of supervised
Angela Crozier                                                                       July 10, 2017
                      Processor              release
                                             Sentenced to 2 years of
Ed Rounds             Former Loan Offcer                                            June 19, 2017
                                             supervised release
                      Former Vice            Sentenced to 1 day in prison, 3
Sam Tuttle            President/             years of supervised release and 6       June 5, 2017
                      Loan Offcer            months of home detention
                      Former Senior Vice
                                             Sentenced to time served and one
Craig Meyer           President/Loan                                                April 24, 2017
                                             year of supervised release
                      Offcer




146    Federal Housing Finance Agency Offce of Inspector General
 DEFENDANT                    ROLE             MOST RECENT ACTION                          DATE

Former CEO, CIO, and CFO of the FHLBank of Dallas Indicted, Texas
Co-conspirators allegedly submitted a series of fraudulent reimbursement requests for personal
travel they identifed as business-related, causing the bank to pay approximately $780,000 The co-
conspirators allegedly incurred these expenses in connection with frst-class airfare, limousine services,
concerts, vineyard tours, luxury hotel rooms, lavish meals, and expensive liquor and wine during more
than 30 trips around the country In each instance, the defendants falsely stated the purpose of
their travel was to attend various conferences, planning meetings, strategy meetings, and operations
meetings In fact, however, they did not attend any conference, or conduct any legitimate planning,
strategy, or operations meetings In addition to being reimbursed for numerous trips that served no
legitimate business purpose, the indictment alleges that the defendants further defrauded the FHLBank
of Dallas by requesting payment of more than $450,000 for unused vacation time
                                              Charged by indictment with
                                              conspiracy to make false
                       Former President       statements to a federal home
Terence C Smith        and Chief Executive    loan bank; false statements to a        August 29, 2017
                       Offcer                 federal home loan bank; aiding
                                              and abetting false statements to a
                                              federal home loan bank
                                              Charged by indictment with
                                              conspiracy to make false
                                              statements to a federal home
                                              loan bank; false statements to a
                                              federal home loan bank; aiding
                                              and abetting false statements to a
                       Former Chief           federal home loan bank; conspiracy
Nancy B Parker                                                                        August 29, 2017
                       Information Offcer     to commit federal home loan
                                              bank theft, embezzlement, and
                                              misapplication; federal home loan
                                              bank theft, embezzlement, and
                                              misapplication; aiding and abetting
                                              federal home loan bank theft,
                                              embezzlement, and misapplication
                                              Charged by indictment with
                                              conspiracy to make false
                                              statements to a federal home
                       Former Chief
Michael J Sims                                loan bank; false statements to a        August 29, 2017
                       Financial Offcer
                                              federal home loan bank; aiding
                                              and abetting false statements to a
                                              federal home loan bank




                       Semiannual Report to the Congress • April 1, 2017–September 30, 2017           147
 DEFENDANT                   ROLE             MOST RECENT ACTION                         DATE

Business Owner Sentenced in Bankruptcy Embezzlement Scheme, Florida
Clark D East obtained a loan from Sterns Bank, a member bank of the FHLBank of Minneapolis, to
develop a property in Florida East personally guaranteed the over $4 million held by Sterns Bank for the
development of the property East subsequently defaulted on the loan and fled for bankruptcy protection
with the United States Bankruptcy Court During the bankruptcy proceedings, East was ordered by the
Court to sell the property and pay $1 2 million in sales proceeds to Sterns Bank Rather than repaying
Sterns Bank, East embezzled over $800,000 of proceeds that were part of the bankruptcy estate

                                             Sentenced to 30 months in prison,
                                             3 years of supervised release,
Clark D East          Business Owner                                                 August 25, 2017
                                             and ordered to pay $700,259 in
                                             restitution




 DEFENDANT                   ROLE             MOST RECENT ACTION                         DATE

Sentencing of Former Loan Ofcer/Compliance Ofcer, Missouri
Keith Ray Smith, a former loan offcer and compliance offcer of Community Bank (later known as Secu-
rity Bank of the Ozarks, a member bank of the FHLBank of Des Moines), took out numerous loans in the
names of several bank customers without their authorization He submitted loan applications for varying
amounts and used the personal identifcation of bank customers, including their bank account informa-
tion and Social Security numbers, to falsely submit the loan applications Smith used the fraudulently
obtained funds to gamble or pay for personal expenses
                                             Sentenced to 24 months in prison,
                      Former Loan Offcer/    5 years of supervised release,
Keith Ray Smith                                                                      August 25, 2017
                      Compliance Offcer      and ordered to pay $151,040 in
                                             restitution




 DEFENDANT                   ROLE              MOST RECENT ACTION                        DATE

 Sentencing and Guilty Plea in Identity Theft Scheme, Virginia
Allise Jones conspired with others to use PII associated with current and former employees of Freddie
Mac and the Department of Veterans Affairs The Freddie Mac PII was obtained from a computer
located at Freddie Mac’s headquarters The PII was used to defraud numerous fnancial institutions by
withdrawing funds from the victims’ accounts at fnancial institutions and opening credit accounts using
the stolen identities There are more than 2,500 potential victims in this scheme
                      Participant/Former
Allan Richardson                              Pled guilty to access device fraud     August 23, 2017
                      Freddie Mac Intern
                                              Sentenced to 66 months in prison,
Allise Jones (also
                                              3 years of supervised release,
known as Ajani        Participant                                                     May 19, 2017
                                              and ordered to pay $85,847 in
Ringgold)
                                              restitution




148     Federal Housing Finance Agency Offce of Inspector General
 DEFENDANT                    ROLE             MOST RECENT ACTION                          DATE

Sentencings of Business Owners in Money Laundering Scheme, Kansas
George and Agatha Enns conspired with others, including Plains State Bank (PSB) employees, to
launder money through PSB—an FHLBank member bank that had over $76 million in advances from
the FHLBank in Topeka, Kansas The PSB bank employees failed to fle Treasury reports as required,
based upon the amount and type of cash and monetary instruments deposited into the PSB account
                      Business Owner/         Sentenced to 3 years of probation
George Enns                                                                           August 17, 2017
                      Bank Customer           and $1,751,544 in forfeiture
                      Business Owner/         Sentenced to 3 years of probation
Agatha Enns                                                                           August 17, 2017
                      Bank Customer           and $215,665 in forfeiture




 DEFENDANT                    ROLE             MOST RECENT ACTION                          DATE

Guilty Plea of Former Banker and Doctor Charged, Maryland and Delaware
Zahid Aslam allegedly engaged in a bank fraud scheme with Tae H Kim, his loan offcer at Citibank and
WSFS Bank, respectively Aslam allegedly recruited two associates to misrepresent in loan applications
that they were the true borrowers and operators of medical practices, when, in reality, Aslam owned and
operated the practices and controlled the loan proceeds Aslam allegedly used the third parties to apply
for the loans because he knew that he would not otherwise qualify for fnancing had he applied on his
own behalf In addition, Aslam and Kim allegedly concealed the existence of their extensive fnancial
relationship during the period in which Kim acted as Aslam’s loan offcer, including their joint ownership
of businesses, as well as large cash payments and a BMW sedan that Aslam provided to Kim Citibank
and WSFS are members of the FHLBank System Loss calculations are ongoing
                       Former Senior
                       Vice President         Pled guilty to bank fraud and
Tae H Kim                                                                              August 7, 2017
                       and Relationship       conspiracy to commit bank fraud
                       Manager
                                              Charged by indictment with conspiracy
                       Doctor/Bank
Zahid Aslam                                   to commit bank fraud and false           June 15, 2017
                       Customer
                                              statements to a fnancial institution




 DEFENDANT                    ROLE              MOST RECENT ACTION                         DATE

Sentencing of Former Bank CEO, Missouri

John Howard Cochran, III, former CEO of Mainstreet Bank (MSB), knowingly caused a written form to be
transmitted to Freddie Mac stating that MSB was repurchasing certain loans from Freddie Mac because
the loans had been paid off by the borrowers before their scheduled maturity dates In fact, however,
the defendant knew that the loans had not been paid off and were simply being repurchased by MSB for
investment purposes In total, MSB fraudulently repurchased at least 19 performing loans with a combined
value of approximately $2 33 million from Freddie Mac As a result, Freddie Mac suffered losses

                                              Sentenced to one year of probation
John Howard
                       Former CEO of bank     and ordered to pay restitution of         July 24, 2017
Cochran, III
                                              $29,999 to Freddie Mac

                       Semiannual Report to the Congress • April 1, 2017–September 30, 2017             149
 DEFENDANT                    ROLE              MOST RECENT ACTION                          DATE

 Sentencings of Nonproft Executive Director and CFO, Mississippi
The executive director of a nonproft organization and a co-conspirator submitted fraudulent
documentation to the FHLBank of Dallas to obtain Affordable Housing Funds

                                               Sentenced to 6 months in prison,
                                               6 months of home confnement,
                       Chief Financial
Kayla Lindsey                                  3 years of supervised release,             July 6, 2017
                       Offcer/Accountant
                                               and ordered to pay $186,830 in
                                               restitution, joint and several
                                               Sentenced to 12 months of home
                                               confnement, 3 years of probation,
Marlene Williams       Executive Director                                                 July 6, 2017
                                               and ordered to pay $186,830 in
                                               restitution, joint and several




 DEFENDANT                    ROLE              MOST RECENT ACTION                          DATE

Guilty Plea in HELOC Fraud Scheme, New Jersey
Co-conspirators fraudulently obtained multiple home equity lines of credit (HELOCs) from banks for a
single property To get the banks to extend lines of credit they would not have otherwise approved, the
co-conspirators transferred ownership of the property to Rafael Popoteur, who also lived at the property
The co-conspirators then applied for three HELOCs from multiple banks using Popoteur’s residence as
collateral They hid from the lenders the fact that the property was either already subject to senior liens
that had not yet been recorded, or that the same property was offered as collateral for a line of credit
from another lender The applications also falsely infated Popoteur’s income The equity in the property
was far less than the amount of the HELOC loans Popoteur and others applied for

The victim banks eventually issued more than $495,000 in loans to Popoteur After the victim banks de-
posited money into Popoteur’s bank accounts, he disbursed portions of it to his co-conspirators Eventu-
ally, Popoteur defaulted on all three HELOC loans The Enterprises suffered losses in this scheme
                                               Charged by information and pled
Rafael Popoteur        Participant             guilty to conspiracy to commit           June 26, 2017
                                               bank fraud




150     Federal Housing Finance Agency Offce of Inspector General
Appendix N: Endnotes

1
    12 U.S.C. § 4617(b)(2)(A), (B), (D) (2011).
    Accessed: October 19, 2017, at www.gpo.
    gov/fdsys/pkg/USCODE-2011-title12/pdf/
    USCODE-2011-title12-chap46-subchapII-
    sec4617.pdf
2
    Suspended Counterparty Program, 80 Fed.
    Reg. 79,675 (final rule December 23, 2015)
    (to be codified at 12 C.F.R. pt. 1227). Ac-
    cessed: April 18, 2017, at www.gpo.gov/
    fdsys/pkg/FR-2015-12-23/pdf/2015-32183.
    pdf




                        Semiannual Report to the Congress • April 1, 2017–September 30, 2017   151
F EDERAL H OUSING F INANCE A GENCY
O FFICE OF I NSPECTOR G ENERAL
S EMIANNUAL R EPORT
TO THE C ONGRESS
April 1, 2017, through September 30, 2017




Federal Housing Finance Agency
Office of Inspector General
400 Seventh Street, SW
Washington, DC 20219
Main (202) 730-0880
Hotline (800) 793-7724
www.fhfaoig.gov