Federal Housing Finance Board: Actions Needed to Improve Regulatory Oversight
GGD-98-203
Published: Sep 18, 1998. Publicly Released: Sep 18, 1998.
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Highlights
Pursuant to a congressional request, GAO reviewed the Federal Housing Finance Board's (FHFB) safety and soundness and mission compliance oversight, focusing on evaluating: (1) FHFB's annual safety and soundness and mission compliance examinations of the Federal Home Loan Banks (FHLBanks); (2) other aspects of FHFB's oversight; and (3) the status of FHFB's involvement in the Federal Home Loan Bank System business.
Recommendations
Matter for Congressional Consideration
| Matter | Status | Comments |
|---|---|---|
| GAO continues to support its 1994 and 1997 positions that a single housing government-sponsored enterprise (GSE) regulator be created to oversee the safety and soundness and mission compliance oversight of the housing GSEs. While considering this action, at a minimum, Congress may want to consider taking interim action to redirect FHFB's attention to its primary role as the System's safety and soundness regulator by making FHFB an arm's-length regulator, as in the case of other GSE regulators. This could be achieved by ensuring that its statutory duties do not involve FHFB in any System business. | The Gramm-Leach-Bliley Act of 1999 (P.L. 106-102) included provisions that addressed several of GAO's concerns with FHFB's involvement in System business. | |
| Congress may want to consider giving FHFB specific enforcement authorities it has provided to other GSE regulators. | The Gramm-Leach-Bliley Act of 1999 (P.L. 106-102) provided FHFB with the same enforcement powers provided to the regulator of the other housing GSEs and the same authority to issue orders for corrective actions as provided to bank regulators. |
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Federal Housing Finance Board | To strengthen FHFB in its primary oversight role as the safety and soundness supervisor of the System, FHFB should ensure that critical aspects of FHLBank operations are reviewed as part of every FHFB examination. |
In August 1999, FHFB revised its guidance to examiners and added new requirements for examination coverage and documentation.
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| Federal Housing Finance Board | To strengthen FHFB in its primary oversight role as the safety and soundness supervisor of the System, FHFB should ensure that examiners follow the guidance and complete the appropriate examination procedures described in the examination manual. |
FHFB now requires examiners to attest in writing that all elements of an examination are completed as scoped and to submit for supervisory approval a memo explaining why any element should not be completed.
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| Federal Housing Finance Board | To strengthen FHFB in its primary oversight role as the safety and soundness supervisor of the System, FHFB should adequately document the work performed and conclusions drawn during examinations. |
FHFB examiners are now required to include in their workpapers a summary document discussing each area of operations reviewed and conclusions reached.
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| Federal Housing Finance Board | To strengthen FHFB in its primary oversight role as the safety and soundness supervisor of the System, FHFB should more clearly articulate and document its current enforcement mechanisms, policies, and procedures. |
This recommendation has been closed because Congress provided (P.L. 106-102) FHFB with specific enforcement powers similar to those of other GSE and financial institution regulators, agency action, therefore, unnecessary.
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Topics
Agency missionsBank examinationBanking regulationFederal aid for housingFinancial management systemsGovernment sponsored enterprisesInternal controlsLending institutionsLoan accounting systemsHousing finance