The Federal Housing Finance Agency must improve its risk assessments of Fannie Mae and Freddie Macs real estate-owned properties to provide more comprehensive coverage of GSE risk areas, according to an audit by the agencys official watchdog. In risk assessments of Fannie and Freddie conducted between 2008 and 2011, the FHFA noted that the GSEs large REO inventories were a critical concern the agencys most severe rating. However, the OIG noted that the agency didnt perform any targeted examinations of Fannie and Freddies management and marketing of REO until 2011. Earlier this year, the FHFA completed four targeted examinations focused on GSE REO risks. The first two examinations focused on risks arising from Fannie and Freddies use of vendors to manage REO and the other two examinations looked at their efforts to mitigate losses from problematic properties, noted the OIG.