Government-Sponsored Enterprises

GAO's review of internal controls at the Federal Home Loan Mortgage Corporation (Freddie Mac), the Federal National Mortgage Association (Fannie Mae), and the Student Loan Marketing Association (Sallie Mae) uncovered no significant weaknesses except for Freddie Mac controls over its multifamily business. GAO's work was not comprehensive enough, however, to render an opinion on the design or operations of the entire control system of each of these government-sponsored enterprises. As a result of its weaknesses in controls over purchasing and servicing multifamily loans, Freddie Mac charged off over $300 million against reserves from 1986 through 1990. Freddie Mac has made changes in personnel; suspended purchases of new multifamily loans; and revamped its methods for buying, servicing, and monitoring such loans. Freddie Mac does not plan to resume purchasing new multifamily loans until sometime in 1992.

GAO found that: (1) audits and examinations by internal and external auditors at Freddie Mac, Fannie Mae, and Sallie Mae uncovered no significant weaknesses in government sponsored enterprise (GSE) activities, except for Freddie Mac controls over its multifamily loans; (2) some of the data on delinquent loans reported to Freddie Mac through its automated systems appeared to be unreliable; (3) Freddie Mac control over purchasing and servicing multifamily loans were not appropriately designed or implemented; (4) asset acquisition and quality control tests over business partners uncovered no significant additional weaknesses in GSE operations; (5) as a result of such weaknesses, Freddie Mac charged off over $300 million against reserves from 1986 through 1990, made senior level personnel changes, suspended buying new multifamily loans in October 1990, and made or planned several changes in its purchasing, servicing, and monitoring of multifamily loans; and (6) Freddie Mac does not plan to resume purchasing new multifamily loans until sometime in 1992.