U.S. Representative Darrell Issa, chairman of the House Committee on Oversight and Government Reform, asked the agency overseeing Fannie Mae and Freddie Mac for documents to determine whether they’ve resumed buying “risky, low-quality mortgages.”
In a March 11 letter to Edward DeMarco, acting director of the Federal Housing Finance Agency, Issa questioned whether Citigroup Inc. (C) and other lenders have been selling “loans that fail to meet sensible mortgage underwriting standards and pose an unacceptable risk to both taxpayers and the housing market.” Issa asked for an answer by March 28.
The government-sponsored enterprises Fannie Mae and Freddie Mac, which own or guarantee more than half of U.S. mortgages, were placed in conservatorship in September 2008 and have been sustained by more than $150 billion in U.S. Treasury Department aid. Issa cited a January Bloomberg News article about an internal Freddie Mac review that found underwriting lapses in loans bought from Citigroup.
“As the financial crisis made all too clear, the previously implicit (and now explicit) federal guarantees of the GSEs incentivized reckless lending by mortgage originators in the years leading up to the crisis,” Issa wrote. “Based on the Bloomberg article, it appears the GSEs may be continuing to purchase loans that fail to meet sensible mortgage underwriting standards.”
The FHFA has “received the congressman’s letter and will respond soon,” said Corinne Russell, a spokeswoman for the regulator. Spokesmen for Citigroup, Fannie Mae and Freddie Mac declined to comment.
In his letter, Issa requested “all applicable mortgage- underwriting standards and any changes to those standards” for the period from Jan. 1, 2009, through the present.
He also asked for any communications with the Treasury or President Barack Obama’s administration related to home-lending standards.
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