Excessive Assumption Fees Charged on Federal Home Loan Mortgage Corporation Mortgages

RCED-84-119: Published: Mar 5, 1984. Publicly Released: Mar 12, 1984.

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In response to a congressional request, GAO investigated the fees, points, and other charges levied by lenders on mortgages sold to the Federal Home Loan Mortgage Corporation to determine: (1) the pervasiveness of overcharges; (2) the reasons why Corporation auditors did not uncover excessive fees charged by lenders; (3) the feasibility of establishing a flat fee or some regulation of the assumption fee; and (4) the adequacy of Corporation oversight and enforcement policies regarding overcharges by savings and loan associations.

Although the Corporation was aware of the charging of excessive assumption fees by some seller/servicers, until 1983 it believed that the problem was not widespread and handled complaints individually. In August 1983, the Corporation assigned top priority to identifying overcharges. GAO believes that, considering the Corporation's organizational constraints, its actions have been adequate since then. In the future, the possibility of excessive fees' being charged should be diminished because its fee policy has been clarified and because fewer assumptions will be permitted. The Corporation plans to: (1) continue using its assumption fee inquiry process to make certain that appropriate refunds are made as long as complaints are being regularly received; (2) make certain that all seller/servicers are audited and that overcharges are refunded to borrowers not yet identified; (3) require each seller/servicer on whom no complaints of excessive assumption fees have been received to certify that its fees comply with Corporation policy and make and report appropriate refunds; and (4) review the appropriateness of such assumption fees through its required annual audits of seller/servicers by private accounting firms. Until these actions are completed, it will be impossible to determine the total number and amount of excessive assumption fees and refunds.

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