FEDERAL HOUSING FINANCE AGENCY

OFFICE OF INSPECTOR GENERAL

Audit of the Federal Housing Finance Agency’s Consumer Complaints Process

AUDIT REPORT: AUD-2011-001 DATED: JUNE 21, 2011
Federal Housing Finance Agency

Office of Inspector General Audit Report: AUD-2011-001 

June 21, 2011

Audit of the Federal Housing Finance Agency’s

Consumer Complaints Process

At a Glance

Why FHFA-OIG Did This Audit

In September 2008, the Federal Housing Finance Agency (FHFA or 

Agency) placed the Federal National Mortgage Association (Fannie 

Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) 

(collectively, the Enterprises) into conservatorships in an effort to 

restore their financial health. As of March 31, 2011, the 

U.S. Department of the Treasury had invested nearly $154 billion in the 

Enterprises, and the Federal Reserve has taken major steps to support 

the Enterprises, such as committing to purchase up to $1.25 trillion of 

their securities.

The current national housing finance crisis has left millions of existing 

borrowers, communities, and investors struggling with delinquent and 

defaulted mortgages, loan modifications, and foreclosures. At the same 

time, consumers suffering from the effects of the crisis increasingly 

filed complaints with the Enterprises and FHFA, the conservator and 

regulator of the Enterprises. FHFA staff estimated that 70% - 75% of 

all complaints to the Agency pertained to the Enterprises.

In light of these events, Congress and others expressed interest in 

whether FHFA adequately responded to consumer complaints 

including, but not limited to, complaints of fraud, waste, or abuse. 

These complaints run the gamut from difficulties obtaining information 

from the Enterprises to allegations of potential criminal activity. The 

FHFA Office of Inspector General (FHFA-OIG) initiated this audit to 

assess how FHFA processed consumer complaints.

What FHFA-OIG Recommends

FHFA-OIG recommends that the Agency: (1) design and implement 

written policies, procedures, and controls governing the receipt, 

processing, and disposition of consumer complaints and allegations of 

fraud, that, among other things, define the related roles and 

responsibilities for FHFA and the Enterprises and provide for 

consultation with FHFA-OIG to process allegations of fraud; (2) assess 

the sufficiency of resources allocated to the complaints process; and (3) 

determine whether there are unresolved complaints alleging fraud or 

other potential criminal activity.

In response to FHFA-OIG’s findings and recommendations, FHFA 

provided written comments, dated June 6, 2011. The Agency agreed 

with the recommendations. The complete text of the written comments 

can be found in Appendix A of this report.

What FHFA-OIG Found

FHFA did not adequately process consumer 

complaints. Specifically, FHFA did not:

(1) sufficiently define its role in processing 

complaints received by the Agency or the 

Enterprises; (2) develop and maintain a 

consolidated system for receiving and processing 

complaints; (3) establish effective procedures for 

evaluating complaints alleging potential criminal 

conduct and for referring such complaints to law 

enforcement authorities; (4) consistently followup on consumer complaints referred to the 

Enterprises; (5) comply with its records 

management policy; (6) perform routine 

substantive analyses to identify overall trends in 

complaints; (7) comply with safeguards for 

personally identifiable information received 

from complainants; and (8) prioritize complaints 

or assess the timeliness of responses to 

complainants.

These deficiencies occurred because FHFA did 

not establish a sound internal control 

environment governing consumer complaints, 

including formal policies and procedures for 

complaints received by FHFA and the 

Enterprises. Additionally, FHFA did not assign 

the complaint processing function sufficient 

priority, did not allocate adequate resources to 

the function (it assigned two individuals from its 

public relations staff to carry out the function), 

and did not provide effective oversight including 

performance reporting on the resolution of 

complaints (it was unable to identify the total 

number of complaints received during the audit 

period and report the disposition of each 

complaint). As a result, FHFA lacks assurance 

that complaints, including those alleging fraud, 

waste, or abuse, such as improper foreclosures, 

were appropriately addressed in an efficient and 

effective manner in order to minimize risks.

This is particularly important given FHFA’s 

responsibilities as conservator for the 

Enterprises.
 

 

 

 

 

 

TABLE OF CONTENTS 

Preface..............................................................................................................................................1 

Background......................................................................................................................................2 

Overview of Consumer Complaints ..................................................................................2 

FHFA’s Consumer Complaints Process ...........................................................................3 

FHFA Debated Its Role in the Complaints Process for Two Years .................................5 

Results of the Audit .........................................................................................................................8 

Finding: FHFA’s Oversight of the Receipt, Processing, and Disposition of Consumer
 

Complaints Was Inadequate .............................................................................................8 

1. FHFA Did Not Sufficiently Define Its Role in the Consumer Complaints Process .....8 

2. FHFA Did Not Develop and Maintain a Consolidated System for Receiving and

 Processing Consumer Complaints ..............................................................................10 

3. FHFA Did Not Establish Effective Procedures for the Evaluation and Referral 

 of Consumer Complaints Alleging Fraud, Waste, or Abuse .....................................10 

4. Follow-up on Consumer Complaints Referred to the Enterprises was Inconsistent ..11 

5. FHFA Did Not Follow Essential Records Management Policies ...............................12 

6. FHFA Did Not Perform Routine Substantive Analyses to Identify Trends and Risk

 Areas............................................................................................................................13 

7. FHFA Did Not Comply with Safeguards for Personally Identifiable Information 

Received from Complainants ....................................................................................14 

8. FHFA Did Not Prioritize Consumer Complaints or Assess the Timeliness of
 

Responses to Complainants ........................................................................................14 

Conclusion .....................................................................................................................................15 

Recommendations..........................................................................................................................16 

Objective, Scope, and Methodology .............................................................................................17 

Appendix A: FHFA’s Comments to FHFA-OIG’s Draft Report ..................................................19 

Federal Housing Finance Agency Office of Inspector General|AUD-2011-001|06/21/2011 
Appendix B: FHFA-OIG’s Response to FHFA’s Comments........................................................22 

Appendix C: Summary of Management’s Comments on the Recommendations .........................23 

Report Distribution ........................................................................................................................24
 

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ABBREVIATIONS/ACRONYMS 

Fannie Mae.............................................................Federal National Mortgage Association 

FBI .................................................................................................. Federal Bureau of Investigation
 

FHFA or Agency.......................................................................... Federal Housing Finance Agency 

FHFA-OIG ...................................... Federal Housing Finance Agency Office of Inspector General 

FHLBanks............................................................................................... Federal Home Loan Banks 

Freddie Mac..................................................Federal Home Loan Mortgage Corporation 

HERA .......................................................................Housing and Economic Recovery Act of 2008 

MS .................................................................................................................................... Microsoft® 

OCAC ...............................................Office of Congressional Affairs and Communications 

OCO ...................................................................................... Office of Conservatorship Operations
 

OFHEO ................................................................. Office of Federal Housing Enterprise Oversight 

OGC ........................................................................................................ Office of General Counsel 

TBW ................................................................................ Taylor, Bean &Whitaker Mortgage Corp. 

Federal Housing Finance Agency Office of Inspector General|AUD-2011-001|06/21/2011 

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f

Federal Housing Finance Agency
 

Office of Inspector General 

Washington, D.C. 

PREFACE
 

FHFA-OIG was established by the Housing and Economic Recovery Act of 2008 (Public Law 

No. 110-289), which amended the Inspector General Act of 1978 (Public Law No. 95-452), to 

conduct audits, investigations, and other activities of the programs and operations of FHFA; to 

recommend policies that promote economy and efficiency in the administration of such programs 

and operations; and to prevent and detect fraud and abuse in them. This is one of a series of 

audits, evaluations, and special reports published as part of FHFA-OIG’s oversight 

responsibilities to promote economy, effectiveness, and efficiency in the administration of 

FHFA’s programs. 

The objective of this performanc e audit was to assess how FHFA processed consumer 

complaints. The audit found that FHFA did not have an adequate complaints process. For 

example, FHFA assigned only two individuals to process complaints; did not segregate 

complaints from other correspondence within its systems; did not refer potentially criminal 

allegations to law enforcement authorities; and did not consistently log telephone complaints. 

FHFA-OIG believes that the recommendations contained in this report will help the Agency 

develop and adopt more economical, effective, and efficient operations. FHFA-OIG appreciates 

the assistance of all those who contributed to the audit. 

This report has been distributed to Congress, the Office of Management and Budget, and others 

and will be posted on FHFA-OIG’s website: http://www.fhfaoig.gov/. 

Russell A. Rau 

Deputy Inspector General for Audits 

Federal Housing Finance Agency Office of Inspector General|AUD-2011-001|06/21/2011 
BACKGROUND 

On July 30, 2008, the Housing and Economic Recovery Act of 2008 (HERA) established FHFA 

as regulator of the three housing-related government-sponsored enterprises: Fannie Mae, Freddie 

Mac, and the Federal Home Loan Banks (FHLBanks). FHFA’s mission is to promote their 

safety and soundness, support housing finance and affordable housing goals, and facilitate a 

stable and liquid mortgage market. 

On September 6, 2008, just five weeks after its creation, FHFA became conservator of Fannie 

Mae and Freddie Mac, and the U.S. Department of the Treasury (Treasury) began providing the 

Enterprises substantial financial support. As conservator, FHFA preserves and conserves the 

assets and property of the Enterprises, ensures they focus on their housing mission, and 

facilitates their financial stability and emergence from conservatorship. As of March 31, 2011, 

Treasury had invested almost $154 billion in the Enterprises in an effort to stabilize their 

operations and the mortgage market generally. The Federal Reserve also took steps to support 

the Enterprises, such as committing to purchase up to $1.25 trillion of their securities. 

On October 12, 2010, FHFA’s first Inspector General was sworn in, and FHFA-OIG commenced 

operations. In November 2010, FHFA-OIG initiated this audit to assess how FHFA processed 

consumer complaints. For purposes of this report, consumer complaints include, but are not 

limited to, those involving allegations of fraud, waste, or abuse. These complaints run the gamut 

from difficulties obtaining information from the Enterprises to allegations of potential criminal 

activity. The time period covered by this audit begins with the creation of the Agency on July 

30, 2008, and continues for two years and three months, through October 31, 2010, when FHFAOIG’s operations began. 

Overview of Consumer Complaints 

Consumer Complaints Pertaining to FHFA and the Enterprises 

The current national housing finance crisis has left millions of existing borrowers, communities, 

and investors struggling with delinquent and defaulted mortgages, loan modifications, and 

foreclosures. FHFA reported in its Fiscal Year 2010 Performance and Accountability Report 

that continued uncertainty about economic conditions, employment, housing prices, and 

mortgage delinquency rates were likely to result in additional losses and Treasury investments in 

the Enterprises. 

The deteriorating financial conditions in the housing market have been accompanied by a 

substantial increase in consumer complaints, including those about the Enterprises. While both 

Enterprises developed internal controls to manage these complaints, a December 2, 2010, FHFA 

review of the Enterprises’ consumer complaints procedures – when describing the rationale for 

conducting the review – reported an “increased number of repeat complaints and increased 

number of consumers who claim Fannie Mae or Freddie Mac are not responsive.” Consumers 

file complaints with FHFA, the Enterprises, or both. In some instances, consumers elevated to 

FHFA their complaints that were initially filed with the Enterprises. Although FHFA personnel 

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were unable to identify the total number of complaints received during the audit period, they 

stated that the number of individuals who contacted the Agency with complaints increased 

dramatically. Further, more than 70% of all consumer complaints received by FHFA during the 

audit period were submitted by individuals who claimed they were experiencing problems with 

the Enterprises.1 

Complaints of Fraud, Waste, or Abuse 

During the audit period, the nation also witnessed a dramatic surge in mortgage fraud cases. 

According to statistics released by the Federal Bureau of Investigation (FBI) in July 2009, there 

was a 36% increase in reports of mortgage fraud in fiscal year 2008 compared to fiscal year 

2007.2 Further, financial institutions estimated that they lost at least $1.4 billion to mortgage 

fraud in fiscal year 2008, an increase of 83% in estimated losses over fiscal year 2007. 

FHFA received complaints alleging fraud, waste, or abuse through the same processes as 

consumer complaints. Many of these allegations involved possible improper foreclosure actions 

on single family residential mortgages, which is an area of considerable risk because of the 

potential adverse impact on the consumer. 

FHFA’s Consumer Complaints Process 

Beginning in late 2008, FHFA assigned the task of handling consumer complaints to two 

individuals who worked in the Office of Congressional Affairs and Communications (OCAC), 

the unit responsible for handling most of the Agency’s external correspondence. The two 

employees were given consumer complaint processing duties in addition to their existing 

significant responsibilities. 

FHFA’s practices for processing consumer complaints varied according to the means of their 

communication and their subject matter. Written, email, and telephone complaints were 

processed separately and differently. Additionally, depending upon the subject matter, OCAC 

forwarded complaints to the Enterprises or processed them internally. 

Written Complaints 

During the audit period, FHFA received written correspondence by U.S. mail, private express 

mail carrier, and telefax. All such correspondence, including written complaints, was delivered 

to the Office of the Director and entered into FHFA’s internal electronic information system, 

known as TRAKKER.3 

1

 Sometimes the Agency received complaints from current and former employees of the Enterprises. This audit did 

not extend to complaints from employees related to personnel issues. 

2 See, 2009 Mortgage Fraud Report “Year in Review,” FBI National Press Release, dated July 7, 2009, available at
 

http://www.fbi.gov/stats-services/publications/mortgage-fraud-2009. 3

 FHFA developed this electronic system in 2008 to serve as a document storage system for hard copy, written
 

correspondence received by the Agency. 

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Within TRAKKER, FHFA did not prioritize consumer complaints. FHFA’s external 

correspondence was subdivided into categories or classifications. One such category was 

“public inquiries,” which included consumer complaints. Other categories included 

Congressional correspondence and stakeholder inquiries. FHFA did not assign any priority to 

the public inquiries category. Further, although FHFA advised that all written complaints were 

filed within the public inquiries category, FHFA-OIG’s random review of correspondence 

retained throughout the TRAKKER system revealed that complaints were also filed among other 

categories in the system, including the “Presidential” communications category. Thus, even if 

the Agency had manually culled complaints from the public inquiries category, it still would not 

have identified all written complaints for this audit. 

Complaints logged into the public inquiries category of the TRAKKER system were 

commingled with other general correspondence. TRAKKER did not provide FHFA with the 

capability to separate complaint correspondence from all other correspondence. No subclassifications, codes, or categories were entered at the time of logging that would allow FHFA 

later to identify correspondence containing complaints. As a result, FHFA cannot efficiently and 

accurately report – or even provide summary information – concerning the volume or type of 

written complaints received by the Agency, the number of unresolved complaints, the average 

amount of time to resolve a complaint, or how complaints were resolved. Because complaints 

were commingled with multiple types of general correspondence, the Agency was also unable to 

analyze trend data and identify risk areas. Accordingly, the Agency was unable to efficiently 

fulfill FHFA-OIG’s request for complaints received during the audit period. FHFA had no 

capability – short of a manual inspection – to access the written complaints it had received over 

the course of the 27 month audit period. This inability was a limitation in the scope of the audit. 

Electronic Mail Complaints 

FHFA also commingled email complaints with other external email communications, which 

again, inhibited its ability to report efficiently and accurately on the volume, types, timing, and 

resolution of complaints. In late 2008, FHFA established a public email account 

(FHFAInfo@fhfa.gov) and posted the address on the Agency’s website. The subject matter of 

the emails received from the public varied and included, among other things, comments, 

questions, and complaints. Emails received from the public were retained in the Agency’s email 

system. However, similar to the Agency’s practice with respect to written correspondence, 

FHFA did not adopt a system or procedures to preserve and retain separately emails containing 

complaints from the entire universe of external emails that it received. Accordingly, FHFA’s 

email complaints suffer from some of the same deficiencies noted with respect to written 

complaints retained in the TRAKKER system. 

FHFA-OIG manually reviewed all emails that were received and designated as a complaint by 

the Agency for the specified audit period. The Agency formulated the emails into a database that 

FHFA-OIG used for the audit. FHFA-OIG determined that 585 consumer email complaints were 

received during the audit period. Of these complaints, 115 were retained by the Agency for 

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internal processing4 and the remaining 470 complaints were referred to the Enterprises. 

FHFA-OIG also determined that 27 complaints included allegations of fraud,5

 and 68 contained 

allegations of improper foreclosures. 

According to the Office of General Counsel (OGC) staff, it was FHFA’s practice to refer email 

complaints containing allegations of possible fraud, waste, or abuse to OGC for review and 

appropriate action. But, according to OGC, no records exist showing how many such complaints 

were referred for review to OGC, the nature of the complaints reviewed, or their disposition. 

Further, OGC confirmed that no complaints were referred to law enforcement authorities during 

the audit period. 

Telephone Complaints 

Telephone complaints that came into the Agency were transferred to OCAC staff. However, 

prior to June 2010, incoming telephone calls from individuals who registered complaints about 

the Agency or the Enterprises were not recorded. As a result, the nature of each complaint was 

not described, and the complainant’s information was not retained. Further, a description of the 

disposition of each complaint was not preserved. In June 2010, however, one OCAC employee 

began logging telephone complaints by entering and saving complainant contact information on 

a spreadsheet. This practice was not uniformly followed. Specifically, no other OCAC or FHFA 

staff member logged telephone complaint information. Therefore, overall information on the 

number of these complaints was not available, which, similar to the situation with written 

complaints, posed a scope limitation for the audit. Moreover, the inadequate recordkeeping 

represents a significant shortcoming in the complaint resolution process. 

FHFA Debated Its Role in the Complaints Process for Two Years 

Although FHFA recognized the importance of properly handing complaints in its Fiscal 

Year 2010 Performance and Accountability Report – stating that it was committed to providing 

accurate information to industry stakeholders and the public in a timely way – it debated the 

nature and scope of its role for two years and did not implement needed improvements. 

In March and April 2009, FHFA senior managers engaged in a debate recorded in emails 

concerning FHFA’s role in the complaints process. An individual complained to FHFA about 

having difficulties obtaining information related to a home sale under Freddie Mac’s “Home 

Steps” program. The series of internal FHFA emails concluded with the following reply email, 

dated April 1, 2009, from an FHFA senior manager to seven other FHFA officials and staff: 

My own view – we are the regulator and conservator. It is a slippery slope for us to be 

responding to complaints about individual transactions like this. If we think this is 

4

 In some cases, internal processing constituted a summary determination that no action was required. 5

 The scope of this audit did not include assessing the validity of the allegations received by FHFA. Additionally, 

although FHFA-OIG was able to track and analyze the disposition of email complaints, it was unable to perform
 

similar analyses on telephone and written complaints due to the lack of documentation.
 

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evidence of a more general problem or concern we have, we should use it to 

communicate with the appropriate regulated entity about the problem. Otherwise, I see 

no merit to responding to (Mr. X) beyond perhaps a stiffly worded “we received your 

communication and have forwarded your concern to an appropriate party. As a general 

matter we do not intervene in individual transactions” or something like that ... The 

response should come from OER.6 OCO7 can then send the email trail to Fannie ... and 

simply say we are passing along this communication for your information. You may 

take whatever action you deem appropriate. We plan no follow-up. 

Debate within the Agency continued through 2009 and into 2010. In September 2010, consistent 

with the FHFA senior manager’s conclusion quoted above, the Agency posted on its website an 

item entitled, “FHFA: Frequently Asked Questions,” which included two sample questions 

concerning complaints.8 After describing the facts of the underlying complaint, the first inquiry 

concluded, “Can FHFA resolve this situation for me?” FHFA replied that: 

Under conservatorship, FHFA has delegated certain authorities to Fannie Mae and 

Freddie Mac, including responsibility for day to day business operations. FHFA 

generally does not intervene in matters involving individual mortgages, property 

sales or transfers, foreclosures, or other actions. 

The second inquiry asked: 

I have spent long periods of time trying to reach a representative at Fannie Mae or 

Freddie Mac by phone, or I have had unsatisfactory interactions with 

representatives once I have gotten through to one of the companies. As regulator 

and conservator of the Enterprises, will FHFA resolve the issue or help me reach 

a person who will help solve my problem? 

FHFA responded with the same explanation about FHFA’s delegation to the Enterprises, but 

elaborated as follows: 

Both Enterprises have experienced unprecedented levels of calls, emails, and letters 

in the past two years since the housing crisis began and phone call centers are 

sometimes overwhelmed. We urge borrowers to be patient as they attempt to contact 

the Enterprises directly to resolve mortgage-related issues. 

Throughout this period, the Agency’s posture was that the Enterprises, not FHFA, should handle 

complaints, and that FHFA’s handling of complaints was simply a “courtesy” provided to 

consumers. Further, FHFA did not clarify what role it should play in overseeing the Enterprises’ 

resolution of complaints. For example, FHFA issued no guidance concerning the content and 

format of resolution reports, did not routinely reconcile reports, and obtained and reviewed 

6

 “OER” was the acronym that FHFA used to refer to its Office of External Relations, which was the predecessor to 

OCAC.
 7

 “OCO” is an acronym used to describe the Office of Conservatorship Operations.
 8 See http://www.fhfa.gov/Default.aspx?Page=316. 

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disposition documentation in only two cases (even though such documentation was requested for 

complaints forwarded to the Enterprises for a response).9 

In October 2010, OCO began a review of the consumer complaints process at Fannie Mae and 

Freddie Mac. OCO’s decision to conduct the review purportedly was “based on the increased 

number of repeat complaints and the increased number of consumers who claim Fannie Mae or 

Freddie Mac are not responsive.”10 Based on its review, OCO recommended that FHFA address 

long-standing questions concerning its role in resolving consumer complaints. OCO rhetorically 

asked, “What role does FHFA want or need to play in the consumer complaint arena?” Should 

FHFA play an active role in complaint resolution, “or determine that they are an intermediary” 

and simply refer complaints to the Enterprises? Responding to its questions, OCO observed that 

FHFA must determine whether to involve itself only with complaints sent to FHFA or to play 

some role in reviewing the resolution of all complaints sent to the Enterprises. The OCO 

report’s final section, entitled “OCO Minimum Suggestions,” urged FHFA to “take a more active 

monitoring position in the complaint process.” Specifically, the report concluded that FHFA 

should better manage its consumer complaint referral process, including doing the following: (1) 

actively monitoring the weekly reports11 to ensure that sufficient information is obtained; and (2) 

obtaining and reviewing at least a sample of the actual documentation for sufficiency in 

addressing the complaints. 

Additionally, in response to recommendations by FHFA’s former Office of Internal Audit, the 

Agency engaged a contractor to assess its internal controls over the handling of external 

stakeholder correspondence, including consumer complaints. As of the Agency’s June 6, 2011, 

comments to a draft of this report, the Agency had neither fully resolved the internal debate 

concerning its role in the consumer complaint process nor implemented any of the 

recommendations included in its contractor’s final report received on May 5, 2011.12 

9

 FHFA-OIG did not assess the processes used by the Enterprises to handle complaints received either directly or 

from FHFA. 

10 The reasons for the review are unclear, but there is evidence that it may have been prompted by FHFA-OIG’s 

inquiries on the subject. Although FHFA claims that its decision was prompted by the volume of complaints and 

concerns about the Enterprises’ responsiveness, the Agency’s meeting minutes indicate that an OCO staff member 

explained to one of the Enterprises that “FHFA is trying to gain a better understanding of the consumer complaints 

process at both Enterprises, especially in light of a recent IG request.” 11 In late 2009, FHFA began receiving weekly reports from the Enterprises that outlined the status of the referred 

complaints. However, the weekly reports were strictly narrative and were not supplemented by supporting 

documentation. Also, FHFA did not conduct adequate and/or timely reconciliations of the weekly reports to ensure 

that proper action was taken to address the complaints. FHFA officials stated that informal reconciliations of the 

complaints were performed; however, this process was not documented. Furthermore, OCAC staff explained that 

they were at one point up to five weeks behind in conducting the reconciliations.

12 We did not assess the status of FHFA’s implementation of the recommendations in the contractor’s report, but 

instead relied on statements included in FHFA’s June 6th comments. 

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RESULTS OF THE AUDIT
 Finding: FHFA’s Oversight of the Receipt, Processing, and Disposition of Consumer 

Complaints Was Inadequate 

For the period of July 30, 2008, through October 31, 2010, FHFA did not adequately process 

consumer complaints, including those alleging fraud, waste, or abuse. Specifically, FHFA did 

not: 

(1) Sufficiently define its role in processing complaints received by the Agency or by the 

Enterprises; 

(2) Develop and maintain a consolidated system for receiving and processing complaints; 

(3) Establish effective procedures for evaluating complaints alleging potential criminal 

conduct and for referring such complaints to law enforcement authorities; 

(4) Consistently follow-up on consumer complaints referred to the Enterprises; 

(5) Comply with its records management policy;13 

(6) Perform routine substantive analyses to identify overall trends in complaints; 

(7) Comply with safeguards for personally identifiable information received from 

complainants; or 

(8) Prioritize complaints or assess the timeliness of responses to complainants. 

This occurred because the Agency did not establish a sound internal control environment14 that 

included formal policies and procedures regarding complaints processing. Further, FHFA did 

not assign the complaint processing function sufficient priority, allocate adequate resources, or 

perform effective oversight, including performance reporting on the resolution of complaints. As 

a result, FHFA lacks assurance that complaints, including those alleging fraud, waste, or abuse, 

were appropriately addressed in an efficient and effective manner. 

1. FHFA Did Not Sufficiently Define Its Role in the Consumer Complaints Process 

As the regulator and conservator of the Enterprises, FHFA did not sufficiently define its role and 

responsibilities for the receipt, processing, and disposition of consumer complaints. For 

example, FHFA has not: 

 Clearly defined its role in resolving consumer complaints; 

 Developed and adopted a formal policy establishing organizational responsibilities for 

receiving, processing, and resolving complaints. FHFA-OIG found no written policies or 

procedures governing the complaints process; 

13 FHFA Policy No. 207: Records Management Policy, dated January 9, 2009.
 14 The Government Accountability Office published Standards for Internal Control in the Federal Government, 

dated November 1, 1999, which discusses the control environment in terms of management’s framework for 

planning, directing, and controlling operations to achieve objectives.
 

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 Provided the necessary resources to address complaints and instead – without providing 

additional needed training – assigned the task of processing all complaints to two 

employees who already had significant responsibilities within OCAC; 

 Conducted appropriate follow-up on the disposition of complaints referred to the 

Enterprises, nor has it obtained and reviewed the supporting documentation reflecting 

such disposition; or 

 Actively monitored all pending complaints or developed the capacity to do so. 

FHFA-OIG concluded that FHFA’s failure was largely the result of its inability to decide 

whether to handle consumer complaints, and how to address those complaints it decided to 

handle. From the onset, FHFA treated its complaints processing function more as a public or 

external relations task, as opposed to a core regulatory or conservator function. 

To date, FHFA has not published formal policies and procedures that could serve as a guide to its 

employees and could inform the public regarding whether FHFA is prepared to intervene on 

behalf of citizens who experience difficulties in matters involving the Enterprises. FHFA has 

been aware of the problem; indeed, it has debated the issue for two years. 

FHFA assigned the responsibility for the receipt, processing, and disposition of complaints to 

two OCAC employees. Both individuals had significant responsibilities in addition to 

processing the complaints coming into the Agency. As a result, the OCAC employees were 

limited in their ability to focus attention on complaint processing even though the Agency 

reported that complaint activity was increasing. Moreover, the OCAC staff members did not 

have a clear statement of FHFA’s intent to address complaints, as would be the case if the 

Agency had written policies and procedures for processing complaints. Indeed, one of the two 

OCAC employees who handled complaints advised an OCAC senior manager that she was 

concerned that FHFA’s procedures for handling complaints could become “an emergency 

situation or embarrassing PR nightmare.” 

Additionally, the two OCAC staffers who managed FHFA’s complaints process routinely made 

ad hoc, important decisions regarding complaint referrals from FHFA to other government 

agencies, external organizations, and the Enterprises. These decisions were not governed by an 

Agency-wide policy, there were no required approvals or management oversight of such actions, 

and there were no procedures to provide supervisors with evidentiary support for their decisions 

or to perform follow-up. The OCAC staffers received no specific training regarding how to 

evaluate complaints or how to identify allegations requiring further action by the Agency or 

referral to law enforcement authorities, such as the Department of Justice or the FBI. 

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2.	 FHFA Did Not Develop and Maintain a Consolidated System for Receiving and 

Processing Consumer Complaints 

FHFA used three separate systems to log complaints: (1) a Microsoft® (MS) Excel spreadsheet to 

log telephonic complaints;15 (2) an MS Outlook email account to log email complaints; and (3) 

the TRAKKER system to log hard copy complaints, including letters and faxes. Further, FHFA 

did not monitor complaints sent directly to the Enterprises. This decentralized methodology 

limited oversight of the total population of complaints because there was no consolidated 

management reporting system.16 In fact, FHFA was unable to identify the total number of 

complaints the Agency and Enterprises received during the audit period. Without such a 

consolidated system, the Agency was unable to provide transparency of the complaints 

environment, including management reporting and appropriate access to Agency staff to 

facilitate effective oversight of the complaints process. 

Additionally, FHFA lacked formal procedures governing its process for tracking and reconciling 

complaints using the three systems identified above, as well as the Enterprises’ reports. This 

lack of procedures impaired the consistency and usefulness of the information maintained and 

oversight of the complaints process. 

FHFA also did not establish minimum information requirements necessary to make 

well-supported and documented decisions regarding the processing of complaints. Consumer 

complaints received by the Agency covered a variety of topics and contained a wide range of 

information – from as little as the complainant’s first name to more than a year’s worth of 

written correspondence and documentation, sometimes including complete loan packages. 

FHFA, however, took no action to establish a consolidated management reporting system for 

complaints, standard complaint documentation, data elements for required information, or 

consistent categories and classifications of complaints that would be useful in controlling the 

complaints process and ensuring Agency and Enterprise responsiveness to complainants. 

Rather than develop a consolidated management reporting system for complaints, FHFA 

tolerated an inefficient, decentralized complaints process. As a result, it lost track of more than 

two years of written, telephone, and email complaints and lacks assurance regarding the 

adequacy of responses. 

3.	 FHFA Did Not Establish Effective Procedures for the Evaluation and Referral of 

Consumer Complaints Alleging Fraud, Waste, or Abuse 

FHFA-OIG determined that there were 585 email complaints submitted during or in close 

proximity to the audit period. These complaints were received by FHFA and, in some cases, one 

of its predecessor agencies (the Office of Federal Housing Enterprise Oversight (OFHEO)). 

Among the complaints reviewed by FHFA-OIG, there were 95 complaints containing allegations 

of fraud and/or improper mortgage foreclosure. Of these 95 complaints, 27 involved allegations 

15 As previously discussed, the spreadsheet was used by only one employee, and its use began in June 2010. 

16 A reporting system must meet the requirements in FHFA Policy No: 207: Records Management Policy, dated 

January 9, 2009. 

Federal Housing Finance Agency Office of Inspector General|AUD-2011-001|06/21/2011 

10
 
of fraud, and the remaining 68 related to allegations of improprieties in the handling of 

foreclosures. 

According to OGC staff, it was FHFA’s practice during the audit period to refer consumer 

complaints containing allegations of possible fraud, waste, or abuse to OGC for review and 

appropriate action. However, neither OCAC nor OGC maintained records of complaints 

forwarded by OCAC to OGC. Thus, OGC was unable to verify that OCAC had forwarded any 

allegations of fraud and/or improper mortgage foreclosure to OGC, and, if it did, what became of 

the referrals. OGC was able to confirm, on the other hand, that it had not referred any 

complaints to law enforcement during the period covered by this audit. 

Failure to recognize and quickly provide law enforcement authorities with information about 

allegations of fraud and other potential criminal conduct presents a significant risk for the 

Agency. For example, in June 2008, serious allegations of fraud were reported to FHFA’s 

predecessor agency, OFHEO, by an investigative reporter who claimed – in an email – to be in 

contact with a former employee of Taylor, Bean &Whitaker Mortgage Corp. (TBW), once one of 

the nation’s largest mortgage lenders. The former employee alleged that TBW was fraudulently 

selling loans to Freddie Mac that TBW had not yet purchased, and that TBW was using the 

proceeds paid by Freddie Mac to re-pay advances it received. The information was circulated 

among OFHEO’s senior managers (who became FHFA senior managers when OFHEO was 

consolidated into FHFA at the end of July 2008). OFHEO decided to follow-up on the 

allegations, but no standard procedures were in place to assure prompt follow-up. As a result, 

the complaint was neither pursued to completion, nor was it referred to law enforcement 

authorities for evaluation or possible investigation. 

A little more than a year after FHFA’s predecessor agency received the email alleging fraud at 

TBW, federal law enforcement authorities executed a search warrant on TBW’s offices in 

Florida. Warrants were also executed simultaneously at TBW’s primary bank, Colonial Bank of 

Orlando, Florida. Criminal charges followed against multiple individuals, and in April 2011 the 

former Chairman of TBW was convicted on federal charges of participating in a multi-billion 

dollar scheme that defrauded Freddie Mac and contributed to the failures of Colonial Bank and 

TBW. Six other individuals from TBW or Colonial Bank entered pleas of guilty for their roles in 

the scheme. Although it is impossible to conclude what may have happened if FHFA’s 

predecessor, OFHEO, or FHFA had contacted law enforcement authorities in 2008 – more than 

one year before the execution of the search warrant – its failure to do so vividly illustrates the 

importance of expeditiously and thoroughly following-up on complaints of fraud and having 

procedures to ensure that such follow-up occurs. 

Based on the above, FHFA should determine if there are other unresolved complaints alleging 

fraud to ensure that appropriate action is taken. 

4. Follow-up on Consumer Complaints Referred to the Enterprises Was Inconsistent 

As previously mentioned, the Agency conducted a limited review of its complaints procedures in 

late 2010. Although this review did not result in the establishment of a written policy setting 

Federal Housing Finance Agency Office of Inspector General|AUD-2011-001|06/21/2011 

11 
 

forth FHFA’s role and responsibilities with respect to complaints, it led to the adoption of some 

improvements. For example, FHFA required both Enterprises to submit weekly reports setting 

forth in narrative form the current status of each complaint that FHFA had previously referred to 

them for disposition. 

Without written policies, however, OCAC staff and the Enterprises continued to lack clear 

direction regarding the objectives that FHFA intended to achieve in the management and 

oversight of the weekly reports and the complaints process in general. Each of the Enterprises 

used different formats for their respective reports and did not categorize them in the same 

manner. Moreover, OCAC staff did not routinely and promptly reconcile the weekly reports 

submitted by the Enterprises with the original complaints that FHFA had referred to them in the 

first place. As a result, OCAC performed no meaningful analysis of the information provided by 

the Enterprises and did not adequately monitor the Enterprises’ handling of complaints. Indeed, 

OCAC staffers advised that they considered complaints to be resolved or disposed of at the time 

that they were referred to the Enterprises. Thus, follow-up served no procedural purpose; the 

complaints were already “closed.” 

Although FHFA’s standard referral letter to the Enterprises requested copies of disposition 

documentation, in nearly every instance where the Enterprises reported a complaint’s status, 

FHFA took no steps to obtain and review the actual documentation of the transactions that were 

the subject of the complaint.17 Of the 470 complaints referred to the Enterprises, FHFA actually 

obtained all correspondence and disposition documentation in only 2 instances. 

5. FHFA Did Not Follow Essential Records Management Policies 

FHFA did not follow its records management policy with regard to email complaints it received. 

FHFA Policy No. 207: Records Management Policy (January 9, 2009) requires the following: 

FHFA shall create, maintain, and preserve information as records, regardless of physical 

format, which contain adequate and proper documentation of the organization, functions, 

policies, decisions, procedures, and essential transactions of the Agency to protect the legal 

and financial rights of the Government and of persons directly affected by the Agency's 

activities. 

Further, FHFA guidance implementing FHFA Policy No. 207 explains that MS Outlook is not an 

approved recordkeeping system and should not be used as one. Nonetheless, FHFA retained 

email complaints submitted to the Agency via FHFAInfo@fhfa.gov in MS Outlook. This 

resulted in two related deficiencies. 

First, the Agency did not ensure that the email records were safely stored for efficient retrieval 

by authorized users. FHFA has not implemented procedures that enable staff to retrieve 

complaints in an automated fashion. For the Agency to create a universe of email complaints for 

17 When FHFA forwarded a complaint to an Enterprise, it included the following standard language in the referral 

email “...please copy back all correspondence, supporting documentation, and resolution to FHFAInfo@fhfa.gov so 

that we may track” the complaints. 

Federal Housing Finance Agency Office of Inspector General|AUD-2011-001|06/21/2011 

12
 
 

 

 

 

FHFA-OIG, OCAC staff had to conduct a labor-intensive manual review of the MS Outlook 

emails. Furthermore, the Agency has not established how these email records will be managed, 

transferred, or destroyed at the end of their lifecycle, in accordance with other Agency policy.18 

Second, the Agency did not create records19 that adequately documented the actions and 

decisions made regarding incoming email complaints. As previously mentioned, FHFA obtained 

all correspondence and disposition documentation for email complaints in only two instances. 

Importantly, FHFA also did not document or retain all actions and decisions made regarding 

complaints alleging fraud, waste, or abuse. The Agency lacked records documenting its review 

of these complaints for possible referral to OGC. Furthermore, OGC confirmed that no 

complaints were forwarded to law enforcement during the audit period. As a result, FHFA was 

unable to demonstrate full compliance with its records management policy and achieve its intent 

that the rights of the government and individuals were protected. 

6.	 FHFA Did Not Perform Routine Substantive Analyses to Identify Trends and Risk 

Areas 

FHFA-OIG found no evidence that FHFA staff analyzed the complaints the Agency received, 

and its systems and lack of procedural guidance inhibited its ability to perform such analysis. 

Identifying trends and risks is important for a regulator and conservator with limited resources. 

Reality dictates that a regulator and conservator cannot reasonably hope to have the capacity to 

cover fully all potential risks; rather, priorities must be established and resources allocated 

accordingly. Thus, a key focus for a regulator or conservator needs to be the collection of data 

and the analysis of trends and risks. FHFA missed an opportunity to use complaint information 

to inform its decision-making. 

FHFA did not actually analyze the complaints that it received during the audit period. Further, 

without information requirements and a consolidated complaint reporting system, FHFA had 

limited capacity to track particular categories of complaints, such as those involving loan 

modifications, mortgage disputes, short sales, real estate owned, improper foreclosures, or 

alleged mortgage fraud. Moreover, because the Agency did not establish uniform record formats 

or standardize the data elements to be used by FHFA and the Enterprises, the Agency’s ability to 

share information across organizational components and record and track the processing of 

complaints by subject matter was impaired. 

As a result of its unconsolidated systems and deficient procedures, FHFA was unable to perform 

routine substantive analyses or identify the emergence of trends in the subject matter of 

complaints received. Such a capacity could have served as an “early warning system” for 

emerging problems, such as the foreclosure document controversy. As previously discussed, 

18 See http://www.archives.gov/records-mgmt/ardor/records-schedules.html. 19 A record is any document or information which is “...made or received by an agency of the United States 

government under federal law or in connection with the transaction of public business...by the agency.” A record 

must be relevant to Agency business. Additionally, the Agency should have continually retained complete email 

records. A complete record would consist of the following, at a minimum: the email itself, the response, any 

attachments to the email, and the transmission information. 

Federal Housing Finance Agency Office of Inspector General|AUD-2011-001|06/21/2011 

13 
 

FHFA-OIG’s analysis of complaints received by email identified a number of complaints that 

involved allegations of improper foreclosure activities. The substance of these complaints and 

actions taken in response to them, if any, were not recorded for analysis. Such analysis could 

have been used by Agency managers to identify supervisory and regulatory issues at the 

Enterprises, allocate resources, prepare management reports, and assess the effectiveness of 

complaint disposition efforts. 

7.	 FHFA Did Not Comply with Safeguards for Personally Identifiable Information 

Received from Complainants 

On August 22, 2010, the Agency issued FHFA Policy No. 301: Use and Protection of Personally 

Identifiable Information Policy, which requires that it: 

	 Be able to identify personally identifiable information in its possession and take 

appropriate safeguards to protect it; and
 

	 Instruct users on the proper use, security, and records retention requirements for the 

systems and records. 

In some cases, consumer complaints included personally identifiable information such as 

complete loan packages with the complainant’s name, Social Security number, address, and loan 

account information. FHFA-OIG found no evidence that FHFA complied with Policy No. 301, 

which required it to safeguarded personally identifiable information in order to minimize the risk 

of unauthorized disclosure. 

The FHFA staff member who began maintaining the spreadsheet log of telephonic complaints in 

June 2010 raised questions about the security of personally identifiable information contained in 

the spreadsheet, and additional instructions were disseminated to remove certain information 

from the log. Moreover, in October 2010, FHFA noted that suitable protection was still not in 

place for personally identifiable information received in consumer complaints that were later 

exchanged with the Enterprises.20 FHFA must ensure that personally identifiable information 

provided by complainants and forwarded to the Enterprises is properly protected by complying 

with Policy No. 301 and implementing safeguards commensurate with the potential risk and 

magnitude of harm that could result from unauthorized disclosure. 

8.	 FHFA Did Not Prioritize Consumer Complaints or Assess the Timeliness of 

Responses to Complainants 

FHFA did not follow a practice of establishing priorities among the complaints received. 

Complaints such as the 95 emails alleging fraud or improper foreclosure, discussed above, by 

their very nature, were worthy of special treatment and more intensive management oversight. 

However, FHFA did not accord them any observable priority to ensure that they were reviewed, 

20 FHFA-OIG did not the test FHFA’s systems controls related to the protection of personally identifiable 

information for the three systems used to capture complaints. 

Federal Housing Finance Agency Office of Inspector General|AUD-2011-001|06/21/2011 

14
 
 

 

evaluated, and properly referred in a timely manner. Importantly, FHFA’s Fiscal Year 2010 

Annual Performance Plan stated that the Agency will cooperate, collaborate, and communicate 

with other government agencies, the Congress, and the public. Timely and effective resolution 

of consumer complaints is key to achieving this objective. In addition, there were no observable 

practices by which OCAC identified any complaints as requiring resolution in advance of timesensitive events like foreclosure or other legal proceedings. 

Although it afforded no priority to complaints, FHFA recognized the importance of properly 

handing them. FHFA’s Fiscal Year 2010 Performance and Accountability Report stated that the 

Agency was committed to providing accurate information to industry stakeholders and the public 

in a timely way. The Report also stated that FHFA continued to respond promptly to inquiries 

from the public, including complaints, during Fiscal Year 2010. However, no specific 

performance goal concerning complaints was established for 2010. For those inquiries that did 

not come within the Agency’s purview, the Report stated that FHFA staff made every effort to 

direct the inquirer to the appropriate source. FHFA’s Fiscal Year 2008 and 2009 Reports 

similarly emphasized the importance of timely responses to public inquiries. Nonetheless, 

FHFA’s procedures were inconsistent with its stated intentions.21 

FHFA-OIG analyzed the 470 complaints referred to the Enterprises. On average, FHFA took 

approximately 16 days to refer such complaints. However, a significant number of complaints 

took much longer to be referred: 86 complaints, or 18% of the 470, took more than 30 days for 

FHFA to forward the complaint to the Enterprises. Moreover, after the complaints were referred, 

FHFA did not routinely monitor the substance or timeliness of the responses to complainants by 

the Enterprises. Finally, when the Enterprises provided FHFA with a copy of their response to a 

complainant, the Agency accepted the Enterprises’ responses at face value and performed no 

independent evaluation of the sufficiency or timeliness of the responses. Indeed, FHFA retrieved 

all disposition records and correspondence from the Enterprises in only 2 of 470 cases reviewed. 

As a result, FHFA lacks assurance regarding the responsiveness of the Agency and Enterprises to 

complainants. 

Conclusion 

FHFA’s Performance Accountability Reports demonstrate that it recognizes the importance of 

responding appropriately to complaints from members of the public, including consumer 

complaints pertaining to the Enterprises. Further, OCO recently conducted a review of 

complaint procedures and encouraged the Agency to assume a more active role in the monitoring 

of complaints. Notwithstanding this, FHFA historically relegated processing complaints to a 

public or external relations function rather than treating it as a core supervisory and regulatory 

responsibility; thus, it provided minimal emphasis and resources to the task. FHFA needs to 

define clearly its complaint-related objectives, its role and responsibilities for meeting those 

21 FHFA considered a complaint “closed” or “responded to” upon referral to either of the Enterprises, regardless of 

whether a substantive disposition had been achieved. Because approximately three quarters of FHFA’s complaints 

were referred to the Enterprises, this resulted in the appearance that complaints were resolved more quickly than was 

the case. 

Federal Housing Finance Agency Office of Inspector General|AUD-2011-001|06/21/2011 

15 
objectives, and its means for gauging its performance in meeting its objectives. This is 

particularly important given FHFA’s responsibilities as conservator for the Enterprises. FHFA 

would also benefit from establishing better oversight of the Enterprises’ complaint procedures, 

including conducting periodic substantive reviews of statistically sound random samples of 

complaints processed and following-up on all complaints to help ensure appropriate disposition. 

FHFA should also be cognizant of the need to assign appropriate resources to the complaints 

process. 

Recommendations 

FHFA-OIG recommends that the Senior Associate Director for Congressional Affairs and 

Communications, in coordination with other appropriate FHFA officials: 

1A. Design and implement written policies, procedures, and controls governing the receipt, 

processing, and disposition of consumer complaints that: 

 Define FHFA’s and the Enterprises’ roles and responsibilities regarding 

consumer complaints; 

 Require the retention of supporting documentation for all processing and 

disposition actions; 

	 Require a consolidated management reporting system, including standard record 

formats and data elements, and procedures for categorizing and prioritizing 

consumer complaints; 

 Ensure timely and accurate responses to complaints; 

 Facilitate the analysis of trends in consumer complaints received and use the 

resulting analyses to mitigate areas of risk to the Agency; 

 Safeguard personally identifiable information; and 

 Ensure coordination with FHFA-OIG regarding allegations involving fraud, 

waste, or abuse. 

1B. Assess the sufficiency of allocated resources, inclusive of staffing, in light of the 

additional controls implemented to strengthen the consumer complaints process. 

1C. Determine if there are unresolved consumer complaints alleging fraud to ensure that 

appropriate action is taken promptly. 

Federal Housing Finance Agency Office of Inspector General|AUD-2011-001|06/21/2011 

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OBJECTIVE, SCOPE, AND METHODOLOGY 

The objective of this performance audit was to assess how FHFA processed consumer 

complaints. Specifically, FHFA-OIG assessed the Agency’s procedures and controls for 

receiving, processing, and resolving complaints from the public prior to the commencement of 

FHFA-OIG’s operations.22 When designing the scope of this audit, FHFA-OIG’s plan was to 

include all complaints received by FHFA from its inception on July 30, 2008, through October 

31, 2010, a period of 27 months. However, that plan could not be carried out because FHFA was 

unable to provide a comprehensive analysis and adequate records of complaints that it had 

received. 

Field work for this audit was performed from December 2010 through April 2011. FHFA-OIG 

conducted this audit at FHFA’s three offices located in Washington, D.C., and reviewed 

available information on the processing of complaints. FHFA-OIG also interviewed FHFA 

personnel. To achieve its objective, FHFA-OIG relied on computer-processed and hard copy 

data from FHFA. This included data contained in the TRAKKER system, plus a spreadsheet and 

the Agency’s MS Outlook email account. FHFA used the MS Outlook account to create an 

MS Access database of the emails that it considered to be complaints, and FHFA-OIG relied on 

this database. FHFA-OIG assessed the validity of the computerized data and found it to be 

generally accurate, but could not conclude on its completeness. 

Regarding written complaints, FHFA was unable to identify for FHFA-OIG all written 

complaints received because the TRAKKER system did not segregate complaints, and FHFA 

would have had to perform a lengthy manual inspection to isolate all complaints. Alternatively, 

FHFA could not provide descriptive records sufficient to establish the number of complaints 

received and logged into the TRAKKER system, their subject matter, the means employed by 

FHFA to resolve them, or other relevant information. As a result, FHFA-OIG was unable to 

analyze written complaints. 

With respect to telephone complaints, FHFA-OIG was provided a phone log with 283 entries 

that was created by an OCAC employee on her own initiative during the 5 month time period 

beginning in June 2010. The information that was recorded, however, primarily consisted of 

contact information and the nature of each call. This information was not sufficient to determine 

if a complaint was, in fact, received, or how FHFA resolved it. As a result, FHFA-OIG was 

unable to analyze the telephone complaints. These matters – concerning written and telephone 

complaints – constituted a scope limitation for this audit. 

FHFA-OIG assessed the internal controls related to its audit objective. Internal controls are an 

integral component of an organization’s management that provides reasonable assurance that the 

following objectives are achieved: 

 Effectiveness and efficiency of operations; 

22 The audit was not intended or designed to assess how the Enterprises processed complaints. 

Federal Housing Finance Agency Office of Inspector General|AUD-2011-001|06/21/2011 

17 
 

 Reliability of financial report; and 

 Compliance with applicable laws and regulations. 

Internal controls relate to management’s plans, methods, and procedures used to meet its 

mission, goals, and objectives, and include the processes and procedures for planning, 

organizing, directing, and controlling program operations as well as the systems for measuring, 

reporting, and monitoring program performance. Based on the work completed on this 

performance audit, FHFA-OIG considers its finding on FHFA’s oversight of the receipt, 

processing, and disposition of consumer complaints to be a significant deficiency in internal 

control within the context of the audit objective. 

FHFA-OIG conducted this performance audit in accordance with generally accepted government 

auditing standards. Those standards require that audits be planned and performed to obtain 

sufficient, appropriate evidence to provide a reasonable basis for FHFA-OIG’s findings and 

conclusions based on the audit objective. FHFA-OIG believes that the evidence obtained 

provides a reasonable basis for the finding and conclusions included herein, based on the audit 

objective. 

Federal Housing Finance Agency Office of Inspector General|AUD-2011-001|06/21/2011 

18
 
APPENDIX A:

FHFA’S COMMENTS TO FHFA-OIG’S DRAFT REPORT

Federal Housing Finance Agency

MEMORANDUM

TO:

This memorandum transmits the Federal Housing Finance Agency's (FHFA) management

response to recommendations set forth in the OIG audit o f FHFA’s consumer complaints process,

performed from December 2010 to April 2011.

This memorandum: (1) expresses management’s agreement with the recommendations; and (2)

identifies the actions that FHFA will take to address the recommendations.

Background

As a result o f widespread distress in the housing market in 2008, FHFA began to receive an

elevated level o f public inquiries and complaints. Prior to that time, the Office o f Federal Housing

Enterprise Oversight, one o f FHFA’s predecessor agencies, received almost no correspondence or

communications from individual consumers. The volume o f calls and inquiries further increased

upon deployment o f the Administration’s Home Affordable Modification Program (HAMP)

program in mid-2009. Since that time, consumer inquiries, concerns, and complaints have been

directed not only to FHFA but also to the Enterprises, the White House, federal and state banking

regulators, and a number o f other federal agencies — often as multiple addressees on a single

piece o f correspondence. Unlike many o f the other agencies that were receiving an increased

number o f public inquiries, FHFA had no dedicated staff nor procedures in place to handle the

new responsibility. Further, the volume o f calls and written complaints that FHFA received and

continues to receive is substantially lower than that o f other agencies that have a more consumerfacing orientation. That said, the informal process that was established was expected to be

temporary in nature and was not integral to the core regulatory responsibilities o f the agency.

FHFA’s primary duty in handling the communications has been to refer consumers to other parties

hat can provide some form o f assistance or relief._____________________

Russell Rau, Deputy Inspector General for Audit, Office o f the Inspector General

(OIG)

FROM: M eg Bums, Senior Associate Director, O ffice o f Congressional Affairs and

Communications (OCAC)

SUBJECT: Audit Report: Audit o f Federal Housing Finance Agency's Consumer Complaint

Process (A U D -2011-001)

DATE: June 6, 2011
To gain clarity about the relative demand on agency resources and whether the existing 

infrastructure needed upgrading, FHFA’s Acting Director in 2010 requested that FHFA’s Office 

of Internal Audit (OIA) conduct a survey of the agency’s external communications infrastructure. 

OIA concluded that existing practices were insufficient to meet the greatly increased demand, and 

FHFA engaged the Concentrance Consulting Group (Concentrance) to assist the agency in 

designing a set of centralized and efficient policies and procedures, as well as automated tools to 

support FHFA’s communications with external parties.

The Concentrance final report was received May 5, 2011. The objectives and options presented 

in that report are relevant to the OIG Audit report’s three recommendations, and will help FHFA 

build on best practices identified at other agencies that also handle consumer inquiries and 

complaints.

We request that the OIG report include the date o f the Concentrance final report, to provide 

balance and context to the statement on Page 8, paragraph 2, sentence 2 “...nor has it 

implemented any of the contractor’s recommendations.” Without the actual timeframe, it appears 

that FHFA has not considered the contractor’s recommendations in a timely manner

FHFA’s response to the OIG recommendations follows:

Recommendation 1A: Design and implement written policies, procedures, and controls 

governing the receipt, processing, and disposition o f consumer complaints that:

1. Define FHFA’s and the Enterprises’ roles and responsibilities regarding consumer 

complaints;

2. Require the retention o f supporting documentation for all processing and disposition 

actions;

3. Require a consolidated management reporting system, including standard record formats 

and data elements, and procedures for categorizing and prioritizing consumer complaints;

4. Ensure timely and accurate responses to complaints;

5. Facilitate the analysis of trends in consumer complaints received, and use the resulting 

analyses to mitigate areas o f risk to the Agency;

6. Safeguard personally identifiable information; and

7. Ensure coordination with FHFA-OIG regarding allegations involving fraud, waste, or 

abuse.

Management Response:

FHFA agrees with the recommendation. The agency will develop and implement written policies, 

procedures, and controls to address the receipt, processing, and disposition o f consumer inquiries. 

This work will be completed by December 31, 2011.
The written policy will clarify that FHFA will continue to accept consumer inquiries, promptly 

redirecting cases to an appropriate entity, while making clear that the agency has limited mandate 

and ability to impact the outcome of the vast majority of individual consumer issues. In the event 

that any trends can be discerned from the limited pool of inquiries that FHFA receives, the 

information received may be shared with the agency's examination staff.

Recommendation 1B: Assess the sufficiency of allocated resources, inclusive of staffing, in light 

of the additional controls implemented to strengthen the consumer complaints process.

Management Response:

FHFA agrees with the recommendation, FHFA will assess both the adequacy and organizational 

placement of staff resources designed to implement the policies and procedures described above. 

After the assessment is completed, FHFA will move forward to locate and appropriately staff the 

consumer complaint function. The assessment will be completed by December 31, 2011.

Recommendation 1C: Determine if there arc unresolved consumer complaints alleging fraud to 

ensure that appropriate action is taken promptly.

Management Response:

FHFA agrees with this recommendation. FHFA Office of General Counsel will review identified 

consumer complaints alleging fraud to determine if appropriate action was taken or needs to he 

taken regarding the complaint received. The example cited in the OIG report, to demonstrate 

that a consumer complaint could help the agency identify instances of significant fraud or 

misrepresentation, was not representative of the types of public inquiries that FHFA has received 

to date, nor was it within the scope of the audit, in terms of time frame or type of communication. 

FHFA requests that the two paragraphs that reference a reporter contacting the agency in June 

2008, regarding an employee at Taylor, Bean, and Whitaker (TBW) and the ultimate resolution of 

TRW, he removed from the report.
APPENDIX B: 

FHFA-OIG’S RESPONSE TO FHFA’S COMMENTS 

On June 6, 2011, FHFA provided comments to a draft of this report agreeing with all the 

recommendations and identifying FHFA actions to address each recommendation. FHFA-OIG 

considers the actions sufficient to resolve the recommendations, which will remain open until 

FHFA-OIG determines that agreed upon corrective actions are completed and responsive to the 

recommendations. See Appendix C of this report for a summary of management’s comments on 

the recommendations. 

FHFA commented that the established, informal complaints process was expected to be 

temporary in nature and was not integral to the core regulatory responsibilities of the Agency. 

FHFA-OIG considers the handling of consumer complaints to serve an important role in 

fulfilling the regulatory responsibilities of the Agency that should be integrated with its safety 

and soundness oversight of the Enterprises. Additionally, FHFA-OIG reemphasizes the 

importance of a consolidated management reporting system for all consumer complaints received 

by the Agency and the Enterprises as discussed in this audit report. 

As the Agency requested, FHFA-OIG included the receipt date of May 5, 2011, for FHFA’s 

contractor’s final report on page 8 of this report. 

FHFA noted that it has a limited mandate regarding consumer complaints. However, pursuant to 

12 U.S.C.§ 4513(a)(1)(B), FHFA has the authority to ensure that the Enterprises comply with 

FHFA’s rules, regulations, guidelines, and orders, and that they operate in a fashion consistent 

with the public interest. FHFA – in its discretion – decided to implement this authority to handle 

consumer complaints. This audit assessed the quality of FHFA’s implementation. 

FHFA requested that FHFA-OIG remove from this report the discussion of TBW’s fraud on 

Freddie Mac, claiming that it was outside the scope of this audit. FHFA-OIG disagrees. 

Although the initial complaint was submitted to FHFA’s predecessor organization, OFHEO, one 

month before the audit period (and one month before OFHEO was consolidated into FHFA), 

FHFA was in possession of the complaint and aware of it during the audit period. Further, the 

fraud continued well into the audit period. FHFA’s failure to act on the complaint serves as a 

stark example of the consequences of failing to appropriately address complaints of fraud, waste, 

or abuse. 

Subsequent to receiving FHFA’s comments to the draft report, the Agency provided FHFA-OIG 

with an expected completion date of December 31, 2011, for Recommendation 1C. Thus, this 

date was included in the summary of management’s comments on the recommendations (see 

Appendix C). 

Federal Housing Finance Agency Office of Inspector General|AUD-2011-001|06/21/2011 

22
 
APPENDIX C: 

SUMMARY OF MANAGEMENT’S COMMENTS ON THE 

RECOMMENDATIONS 

This table presents the management response to the recommendations in FHFA-OIG’s report and 

the status of the recommendations as of the date of report issuance. 

Rec. No. 

Corrective Action: Taken 

or Planned 

Expected 

Completion 

Date 

Monetary 

Benefits 

Resolved:a 

Yes or No 

Open or 

Closedb 

1A FHFA will develop and 

implement written policies, 

procedures, and controls to 

address the receipt, 

processing, and disposition 

of consumer inquiries. 

12/31/2011 $0 Yes Open 

1B FHFA will assess both the 

adequacy and 

organizational placement 

of staff resources designed 

to implement the policies 

and procedures cited in 

Recommendation 1A. 

After the assessment is 

completed, FHFA will 

move forward to locate and 

appropriately staff the 

consumer complaint 

function. 

12/31/2011 $0 Yes Open 

1C FHFA’s Office of General 

Counsel will review 

identified consumer 

complaints alleging fraud 

to determine if appropriate 

action was taken or needs 

to be taken regarding the 

complaint received. 

12/31/2011 $0 Yes Open 

a

 Resolved means – (1) Management concurs with the recommendation, and the planned, ongoing, and completed corrective action is consistent 

with the recommendation; (2) Management does not concur with the recommendation, but alternative action meets the intent of the 

recommendation; or (3) Management agrees to the OIG monetary benefits, a different amount, or no ($0) amount. Monetary benefits are 

considered resolved as long as management provides an amount. 

b

 Once the OIG determines that the agreed-upon corrective actions have been completed and are responsive to the recommendations, the 

recommendations can be closed. 

Federal Housing Finance Agency Office of Inspector General|AUD-2011-001|06/21/2011 

23 
OBTAIN COPIES OF FHFA-OIG REPORTS 

Call the Office of Inspector General at: (202) 408-2544 

Fax your request to: (202) 445-2075 

Visit the OIG web site at: www.fhfaoig.gov 

OIG HOTLINE 

To report alleged fraud, waste, abuse, or mismanagement or any other kind of criminal or 

noncriminal misconduct relative to FHFA’s programs or operations: 

 Call our Hotline at: 1-800-793-7724 

 Fax the complaint directly to us at: (202) 445-2075 

 Email us at: oighotline@fhfa.gov or
 

 Write to us at: 

FHFA Office of Inspector General 

Attention: Office of Investigations – Hotline
 

1625 Eye Street, NW 

Washington, D.C. 20006-4001
 

Federal Housing Finance Agency Office of Inspector General|AUD-2011-001|06/21/2011 

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