The regulator of the Federal National Mortgage Association is being criticized for oversight of the secondary lender’s planned move to a new headquarters facility.
Fannie Mae
is moving from its current landmark location on Wisconsin Ave. in Washington to a new location in the District of Columbia’s Midtown Center building.
The net present value of the new location was presented at $770 million, lower than other options that included renovating its existing space where the lease expires in 2018.
In January 2015, Fannie Mae’s board of directors approved the plan to move its offices to the Midtown Center building — which previously housed the Washington Post.
FHFA authorized the relocation project three days later.
The move will consolidate thousands of employees who are currently housed at numerous locations throughout the nation’s capitol.
Since the time FHFA approved the lease, plans have been drafted that include three enclosed glass bridges to connect different parts of the buildings, spiral staircases and rooftop viewing decks.
FHFA hasn’t approved these features.
But a report from the
Federal Housing Finance Agency Office of Inspector General said in a report released Thursday that the actual build-out costs have turned out to be more than half higher than was originally proposed.
The report indicated that the OIG received an anonymous tip that there was excessive spending on the new location.
A senior executive at Fannie has indicated to the inspector general that it will be a challenge to remain within the $770 million net present value.
Build-out costs per square foot have risen from the projected $164 to $223, and the increased cost will be paid by Fannie. Yet, the FHFA’s Division of Conservatorship has not even been provided with a revised budget.
The OIG noted that its interviews have determined that FHFA had not been reviewing the finances of the project or related contracts.
“Based on facts learned during that review, we believe there are significant financial and reputational risks from the projected costs associated with Fannie Mae’s relocation of its headquarters that warrant immediate, sustained, and comprehensive oversight from FHFA, the conservator of Fannie Mae,” the report stated.
The OIG recommends that FHFA ensures it has adequate experienced internal staff and outside contractors to oversee build-out plans and budgets as Fannie continues to revise and refine them.
The inspector general also recommends that the secondary lender provide
regular updates and formal budgetary reports to FHFA.
While FHFA Director Melvin L. Watt disagreed with some parts of the OIG’s report, he did indicate in a letter that
the regulator will implement the recommendations.
