DATE:	February 25, 2005
MEMORANDUM TO:	Stephen M. Beard
	Deputy Assistant Inspector General for Audits
FROM:	Mitchell L. Glassman, Director
	Division of Resolutions and Receiverships
SUBJECT:	OIG Audit of DRR’s Internal Loan Servicing
	(Assignment No. 2004-059)

This memorandum is in response to audit #2004-059 entitled DRR’s Internal Loan Servicing. This audit focused on $1.9 million of small assets, from a total portfolio of $119 million, and determined that 11 low value non-performing loans in the sample were not being efficiently managed and some asset files had not been created. Further, an additional 43 small loans have remained in the FDIC’s inventory for two years without significant progress toward disposition.

Recommendation
The Director, DRR, require a prompt supervisory review for internally serviced receivership loans assigned to account officers who are detailed or otherwise unable to manage their loan portfolios to ensure that (1) loans are being actively managed, (2) a cost-effective disposition strategy is being used, and (3) asset files are being created and maintained in accordance with the ADM and DRR management instructions.

DRR agrees with the findings and has taken the following steps to implement the OIG’s recommendations: Although DRR already has in place a requirement that loan assets be reviewed quarterly by the supervisor, as a result of this audit, supervisors have been instructed, in writing (copy attached), to ensure that every loan asset has been reviewed in the past 90 days. The supervisors have been reminded of their obligation to ensure that all loans are being actively managed and that a cost effective disposition strategy is in place. Further, although management has recently circulated a memorandum reminding all account officers of their obligation to create and maintain asset files on each loan relationship, management will again remind all account officers of the DRR requirements regarding asset files. The review of assets and the reminder to account officers will be accomplished by May 31, 2005.

As a result of the audit, most of the assets cited in the preliminary draft audit report have been reassigned to account officers that are not detailed to special projects. Asset Management Branch (AMB) managers will closely monitor performance to ensure efficient disposition of remaining assets. Also, once the new asset servicing environment is finalized, the AMB will revise its internal filing policy to ensure that it provides the efficiencies needed. The proposed new asset servicing environment should reduce the requirement for inordinate amounts of hard copy documentation.

Attachment