According to the Federal Housing Finance Agency Office of Inspector General (FHFA-OIG), the FHFA’s examination process is not up to par.

“FHFA-OIG has identified shortfalls in the Agency’s examination coverage, particularly in the areas of Real Estate Owned and default-related legal services,” states a report released Friday.

In fact, the report states the FHFA has not conducted an examination of the GSEs’ management of their REO inventories, “despite the surging number of foreclosures since 2007.”

Likewise, the agency has not examined Fannie Mae’s management of tis retained attorney network or Freddie Mac’s management of its Designated Counsel Program.

In addition, examinations being conducted are not falling in line with expected deadlines.

According to the report, FHFA officials and internal reviews of the agency have arrived at similar conclusions.

Part of the problem, says the FHFA-OIG, is a shortage of accredited examiners. About one-third of its examiners are accredited, and examination teams are currently understaffed.

The report gives FHFA credit for attempting to address these concerns with a hiring initiative starting early this year. However, “FHFA has expressed concern that its current hiring initiative will neither enable it to overcome its examination capacity shortfalls nor ensure the effectiveness of its 2011 reorganization,” the report states.

The FHFA says part of its obstacle in hiring is the perception that the GSEs may be phased out in the near future.

The report faults the FHFA for not relaying these issues to Congress and the public.

The FHFA-OIG recommends the FHFA “assess the extent to which examination capacity shortfalls may have adversely affected the examination program and develop strategies to mitigate these effects.”

The FHFA-OIG also recommended implement an accreditation program for its unaccredited examiners; and to address its shortage in examiners, suggested the FHFA hire contractors from other federal agencies.

The last recommendation was that the FHFA report to Congress annually on its examiner shortage and its progress in fulfilling that shortage.