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The Federal Housing Finance Agency (FHFA) isn’t doing all it can to prevent rating bias, according to the agency’s Office of Inspector General.
In a report on Wednesday, the watchdog said regulator Fannie Mae and Freddie Mac, which itself released a report drawing attention to racial bias allegations in December 2021, should brief state regulators and licensing agencies when they find instances of bias.
It should also notify regulators and licensing agencies when filing complaints about opinions, the OIG said.
The OIG found that in 2022, the FHFA had 17 referrals and 25.6 million active assessment cases in the United States. Department of Housing and Urban Development (HUD) but took no further action.
The report says that the Associate Director of FHFA’s Office of Fair Loan Oversight informed us that the agency does not file complaints with state licensing authorities and has no policy on this. .
The OIG also said that while the FHFA has identified ratings that made explicit references to prohibited bases such as race or color in some rating reports it has reviewed, the FHFA has not determined the extent to which companies use ratings which mistakenly allow for federally prohibited bases on equitable lending.
The FHFA agreed to properly file complaints with government regulatory agencies for any assessments specified in the December 2021 assessment.
It also recommended that the FHFA coordinate with Fannie Mae and Freddie Mac to determine which assessments found bias. The new policy is expected to take effect in May 2023.
Reference Source: Housing Wire
