FHFA Offered Unqualified Buyers Foreclosures, Study Finds
The Federal Housing Finance Agency, the regulator that oversees Fannie Mae and Freddie Mac, offered to sell foreclosed homes to bidders who didn’t meet required standards, the agency’s inspector general said.
The FHFA offered 2,500 homes last year in a pilot bulk-sale program to help Fannie Mae reduce its portfolio of foreclosed properties and expand the supply of rental housing. Bidders were required to show they had financial and management capability and a commitment to working with hard-hit communities, according to a report released today. Twelve of the 47 applicants at least partially failed to meet the criteria, as determined by an outside contractor.
“Fannie Mae did not always follow its contractor’s scores and recommendations,” Deputy Inspector Russell A. Rau said in the report. Fannie Mae, “with FHFA’s concurrence, permitted two potential investors to bid on mortgage pools even though both were scored by the contractor as high risk and not recommended to bid.”
All of the winning bidders met the required criteria, Andrew Wilson, a Fannie Mae spokesman, said in a telephone interview. The report didn’t name the bidders who shouldn’t have qualified.
Three bidders won seven of the eight pools of homes offered for sale. Cogsville Group LLC, a New York-based investor, gained rights to 94 properties in Chicago; Pacifica Companies LLC, a San Diego-based landlord, was the top bidder for 699 properties in Florida; and Colony Capital LLC, a fund founded by Thomas Barrack Jr., won 970 properties in Arizona, California and Nevada. A portfolio of 541 Atlanta homes didn’t receive a satisfactory offer.
The FHFA hasn’t decided whether to pursue future bulk sales, according to a response by Sandra Thompson, deputy director of the agency. Her Sept. 12 memorandum was released today with the report. If the agency offers homes for sale in bulk again, it will provide more guidance to bidders and improve its oversight of the qualification process, she said.
“FHFA management contends that the scoring methodology was reasonably designed, applied and executed in a consistent manner across all bidders, which provided a fair and uniform process of evaluation and scoring,” Thompson wrote in the memo.
Denise Dunckel, a spokeswoman for the FHFA, didn’t immediately respond to requests for comment on the report.
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