This is the third of three evaluation reports released today by the Federal Housing Finance Agency's (FHFA) Office of Inspector General (OIG) regarding the oversight of activities of the government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac by FHFA. This evaluation concerns the GSEs participation in the 2011 Mortgage Bankers Association (MBA) Convention and Exposition.
MBA's event was held at the Hyatt Regency Hotel in Chicago from October 9 to 12, 2011. The annual convention was attended by about 3000 executives who work in mortgage finance including senior managers from major lenders, full service mortgage companies and mortgage brokers, representatives from servicing companies, state and local associations, and affordable housing groups. FHFA personnel also attended at government expense. The GSEs together spent over $600,000 to participate in the convention and 90 GSE employees were registered to attend, 48 for Fannie Mae and 42 for Freddie Mac.
OIG states that, while the expense of the convention was small in relation to all GSE expenses, the money expended did occasion comment and prompt the office to investigate. OIG found that the GSE's per-capita expenditures for registration, travel, and lodging were comparable to allowable expenses for federal employees however it questioned the $140,000 spent to sponsor the convention and $140,415 for business meals and hosted dinners.
OIG found that FHFA did not review or approve either the GSE's participation in the Convention or the decision to purchase sponsorships in advance, viewing the decisions as within the authority delegated by FHFA to the GSEs. In addition to questioning sponsorship and food related expenses, OIG raised issues related to the number of attendees and the value to the GSEs of their participation.
In December 2011 before OIG had completed the field work for the evaluation the FHFA Acting Director issued a letter disallowing further conference sponsorships and expenditures on food at business meetings. On January 25, 2012 the Acting Director issued an additional directive which tempered the provision to allow for limited expenditures on business courtesies and expanded on other aspects of the December letter.
In light of this directive, OIG considers further review of the convention expenses as academic, however it states that whether the issue is satisfactorily resolved will depend on the GSE's implementation of the Acting Director's guidance and OIG will monitor the implementation of this directive as well as the following OIG recommendations:
- FHFA should ensure that the GSE's conduct a comprehensive review of their travel and entertainment policies and revise them to be consistent with the January 25 directive.
- FHFA should review the GSE's proposed revisions to ensure that they are drafted in a manner consistent with the directive and that the GSE's have established appropriate controls to monitor compliance.
FHFA has concurred with the recommendations made by OIG in this matter.