HUD launches Fannie Mae, Freddie Mac reviews

HUD announced on Aug. 10 that it has scheduled separate meetings with each enterprise to launch a comprehensive review and evaluation. According to a HUD news release, notification letters were sent June 14 to Fannie Mae and Freddie Mac regarding HUD’s intent to investigate a range of investments. Each enterprise will be required to compile and submit accounting data.

As government-sponsored enterprises, Fannie Mae and Freddie Mac are private corporations with public missions, and HUD is the regulator charged with ensuring that both are engaging in activities that are consistent with their charter authorities.

Specifically, HUD will examine partnerships, notes receivable and equity investments, with a focus on investments that lack transparency on the entities’ financial statements, such as those classified as “other assets” and “other liabilities.” The lack of transparency as it relates to the enterprises’ financial dealings is a regulatory concern.

HUD’s review and evaluation will determine whether investment activities that were not initiated as part of Fannie Mae and Freddie Mac’s residential mortgage purchase, guaranty and securitization programs are authorized activities consistent with their charter authorities and public purposes. HUD also will examine the extent to which these investments are subject to the internal investment guidelines approved by each enterprise’s board of directors.

HUD’s review and evaluation is to be finished by fall 2007.