Resolution Trust Corporation:

Oversight of Certain Loan Servicers Needs Improvement

GGD-92-76: Published: Apr 24, 1992. Publicly Released: Apr 24, 1992.

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GAO assessed: (1) the Resolution Trust Corporation's (RTC) oversight of inherited loan servicers that service the RTC inventory of mortgages and loans from failed thrifts; and (2) the adequacy of RTC policies and procedures for monitoring the servicers' loan collection activities.

GAO found that: (1) RTC does not adequately oversee its inherited loan servicers, who service $7.5 billion in RTC mortgages and loans; (2) RTC does not have the necessary policies and procedures in place to monitor the servicers' loan collection activities; (3) RTC cannot ensure that servicers are accurately accounting for and remitting loan payments, or if its servicers are sound financial institutions that are able to maintain the value and marketability of RTC mortgages and loans; (4) some of the servicers do not meet reasonable loan standards; (5) in September 1991, the Federal National Mortgage Association considered 84 of 298 institutions servicing loans in Florida ineligible to service RTC mortgages; and (6) RTC is planning to address those issues, but its progress has been slow.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: On August 12, 1993, RTC completed an inventory of inherited loan servicers. This action is fully responsive to the recommendation.

    Recommendation: To improve the oversight of inherited loan servicers, the President and Chief Executive Officer, RTC, should move quickly to compile a national inventory of inherited loan servicers.

    Agency Affected: Resolution Trust Corporation

  2. Status: Closed - Implemented

    Comments: All inherited loan servicers are required to report to a master loan servicer who will provide first level review and oversight. RTC issued a Loan Servicer Oversight Program directive in January 1993. The program provides a schedule for audits and evaluations of all types of loan servicers, including inherited services. It also has criteria for evaluating the servicers' loan collection activities, financial condition, and performance.

    Recommendation: To improve the oversight of inherited loan servicers, the President and Chief Executive Officer, RTC, should ensure that it has policies and procedures in place to monitor and periodically evaluate the servicers' loan collection activities, financial conditions, and overall performance.

    Agency Affected: Resolution Trust Corporation

 

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