Fannie Mae and Freddie Mac protected banks, not homeowners

A recent report on Freddie Mac found the mortgage lender mishandled lapsed loans issued prior to the housing crisis in 2008. The inspector general of the Federal Housing Finance Agency said the government-sponsored entity failed to catch errors that could have increased the recovery of money from banks that sold defective loans.

The FHFA has suspended loan-repurchase agreements as it further investigates the lender's practices for more defective loans, Bloomberg reported. In the report, the inspector general said it is important to resolve the issue as doing so could result in recoveries for both the agency and taxpayers.

In addition, the FHFA is accused of not adequately overseeing settlements between Fannie Mae and Freddie Mac and Bank of America, which totaled $2.87 billion. According to the report, in March 2010, a senior examiner at FHFA raised concerns about Freddie Mac's review process for the Bank of America mortgages, The Washington Post reported.

The examiner said the discrepancies could potentially cost the government billions of dollars. But the FHFA did not test the review policies of the government-sponsored lender, as senior Freddie Mac managers feared they would lose business from Bank of America.

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