Posted on 01 Dec 2011
Fannie Mae and Freddie Mac spent more than $640,000 this fall to send 100 employees to a Chicago mortgage-industry conference and to host events there, a decision the companies defended amid criticism from a lawmaker.
The Federal Housing Finance Agency, which oversees the government-controlled mortgage-finance companies, outlined the costs in a letter to Rep. Randy Neugebauer (R., Texas), a member of the House Financial Services committee. Mr. Neugebauer, who had sought details on the conference, called the spending "lavish."
The federal housing regulator "has special responsibility to make sure that Fannie and Freddie are run responsibly and in a way that minimizes taxpayer losses," Mr. Neugebauer said.
The spending included nearly $342,000 for travel, food, hotel and meeting-room space and $74,000 on four invitation-only dinners for mortgage-lending companies that do business with Fannie and Freddie. The companies spent about $140,000 to sponsor the conference and about $68,000 for registration fees, the regulator said.
The companies' top regulator defended the spending as a whole, but said he would apply greater scrutiny to sponsorships and dinner events. "I believe we can and should provide more detailed direction regarding such expenditures in the future," Edward DeMarco, acting director of the FHFA, wrote to Mr. Neugebauer in the Nov. 23 letter. The letter was released Wednesday by Mr. Neugebauer's office.
Fannie and Freddie dominate the U.S. mortgage market, purchasing and guaranteeing about 70% of new loans from mortgage lenders. Though lenders have few other outlets to purchase their mortgages, Fannie and Freddie say they value face-to-face meetings with customers as a way to understand their needs.
"The cost savings associated with meeting hundreds of customers at one location versus traveling to various locations across the country is significant," said Amy Bonitatibus, a Fannie spokeswoman. Freddie spokesman Doug Duvall said the event allowed Freddie to meet "with our lender customers in a cost-efficient way. In just two days we held approximately 200 meetings."
Fannie and Freddie have reduced their spending on conferences since they were put under federal control, and attend such events when there is enough business justification for doing so, the FHFA said. Scrutiny of Fannie and Freddie has grown on Capitol Hill; their federal rescue three years ago has so far cost taxpayers more than $151 billion. Lawmakers have been irate about large bonuses paid to executives hired to run the companies after their near collapse in September 2008.
The conference, held in October, was also sponsored by the mortgage-lending divisions of J.P. Morgan Chase & Co. and Citigroup Inc. as well as other service providers. Speakers included Rep. Spencer Bachus (R., Ala.), chairman of the House Financial Services Committee and Housing and Urban Development Secretary Shaun Donovan.