NEW YORK ( TheStreet) -- The Federal Housing Finance Agency's Office of Inspector General on Tuesday said that Freddie Mac (FMCC) -- and U.S. taxpayers -- could be looking at billions of dollars in losses from a sloppy mortgage putback settlement with Bank of America (BAC - Get Report).
The Inspector General found that the FHFA's "senior management did not timely address significant concerns raised about the loan review process used by Freddie Mac and its ramifications on underlying the settlement," and didn't even "reach any final conclusion" about Freddie's loan review inadequacies, which could lead to major losses for Freddie in the years ahead.
The Inspector General also said that "in mid-2010, prior to the Bank of America settlement, an FHFA senior examiner raised significant concerns about limitations in Freddie Mac's existing loan review process for mortgage repurchase claims," and that the FHFA "did not timely act on or test the ramifications of the senior examiner's concerns prior to the Bank of America settlement.
Despite additional loan review concerns raised by FHFA senior managers in September 2009, the FHFA acting director approved Freddie Mac's Bank of America settlement in December.Among the various recommendations made in the report were that the FHFA "promptly initiate management reforms to ensure more generally that senior management is apprised of and timely acts on significant concerns brought to its attention," and that the agency's acting director "establish appropriate goals, principles, and procedures at the top of the FHFA organization to guarantee that significant concerns are properly and timely addressed and acted upon." In its response to the Inspector General's report, the FHFA said it had "not changed its view that the settlement reached