A U.S. housing regulator should consider directing government-controlled mortgage finance firms Fannie Mae and Freddie Mac to sue companies that sold them overpriced insurance, an internal watchdog at the regulator said on Wednesday. Overpriced insurance may have cost the companies $158 million in 2012 alone, the Federal Housing Finance Agency's Office of Inspector General said in a report. "We recommend that FHFA assess the merits of litigation," it said. Fannie Mae and Freddie Mac are owned by U.S. taxpayers, which bailed out the firms in 2008 during the financial crisis. The FHFA runs the two firms through a conservatorship. The firms, which guarantee most new U.S. mortgages, are responsible for ensuring homes have insurance against hazards like severe storms and fires. When a borrower enters foreclosure, the companies must pay for the insurance. The inspector general's report said most of this insurance is provided by two firms - Assurant and QBE Holdings, a unit of Australian
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