HUD Takes the Axe to FHA Direct Endorsements
The US Department of Housing and Urban Development (HUD) on Thursday cut off 102 Federal Housing Administration (FHA)-approved lenders from participation in the government program, which insures lenders against default-related losses on qualifying mortgages. The termination of these lenders' direct endorsements came as part of HUD's actions taken against 120 lenders for violating FHA requirements. "At this time of uncertainty in the mortgage market, FHA needs to be especially vigilant in making sure that its approved lenders meet the highest standards of conduct," said HUD secretary Shaun Donovan in a media report. "We expect, and more importantly American homebuyers deserve, that when they deal with an FHA-approved lender, they're dealing with a lender they can trust." The announcement came ahead of the scheduled public release of a report studying the Mortgagee Review Board, the policing arm of HUD responsible for cracking down FHA-insured lenders that violate FHA regulations. The Office of Inspector General (OIG) for HUD finds in its report that the board has historically failed to keep pace with the increase in the volume of FHA-insured loans, according to a report filed at the Washington Post. Staffing issues and outdated technology systems lie at the heart of much of the board's drawbacks, although a mortgage fraud bill signed into law this week allows $490m to government and regulator departments, including HUD, to crack down on mortgage fraud. The extra funding should allow HUD more resources to pursue fraudulent lending and violations among FHA lenders. The OIG's report concludes that the Mortgage Review Board "will remain marginal as an effective sanctioning body unless its enforcement actions include a much larger caseload," according to the WaPo article. Write to Diana Golobay.