By Jacob Bielanski
A failure by the FHFA to document its efforts to validate data used to set annual conforming loan limits was the primary target of a recent report by the FHFA’s inspector general.
The Federal Housing Finance Agency’s Office of Inspector General (OIG) admonished the federal regulator for "frustrating" efforts to audit data collected to establish the Housing Price Index (HPI) in a report published July 22. OIG performed the audit to determine whether the agency followed its written procedures for ensuring the reliability of data used to create the third quarter 2020 expanded-data HPI, which was used to establish the 2021 conforming loan limits. The audit focused on FHFA’s controls over determining the reliability of data it received from each source to generate the expanded-data HPI.
OIG auditors also found the FHFA’s Division of Research and Statistics (DRS) had not yet performed a review of its 2017 Information Quality Guidelines, which it was directed to do by the Office of Management and Budget (OMB) in 2019. Auditors looked at four data sources the DRS uses to compile what is called the expanded-data HPI. As part of its process, the DRS ensures accurate record counts and uniform addresses on transaction information that comes from county-level recorder data, the Government Sponsored Enterprises (Fannie Mae and Freddie Mac), and the FHFA. OIG auditors said DRS "lacked documentation" of efforts to validate the data, though independent testing by the OIG found the data still "conformed to the standard prescribed in DRS’ procedures."
FHFA response. In response to an early version of the OIG report, the DRS replied that it only documents validation procedures "data exceptions or anomalies." In response, the OIG said such a process that only documents validation of failed checks "does not meet the intent of our recommendation."
"Therefore, we consider this recommendation rejected," the report authors wrote.
The data at the center of the report’s first two recommendations is used to set annual conforming loan limits for the GSE’s. Loan limits are a top threshold for mortgages the GSE’s with guarantee. Last November, the FHFA announced an over seven percent increase to the conforming loan limit, raising it from $510,400 to $548,250. The previous year saw a just over five percent increase in the limit, from $484,350.
The FHFA further told the OIG its Office of General Counsel would begin working with stakeholders to evaluate OMB guidance and update its information quality guidelines before Jan. 31, 2022.
MainStory: TopStory GovernmentSponsoredEnterprises Loans Mortgages PrudentialRegulation
Interested in submitting an article?
Submit your information to us today!Learn More
Banking and Finance Law Daily: Breaking legal news at your fingertips
Sign up today for your free trial to this daily reporting service created by attorneys, for attorneys. Stay up to date on banking and finance legal matters with same-day coverage of breaking news, court decisions, legislation, and regulatory activity with easy access through email or mobile app.