Earlier this month, Department of Housing and Urban Development Secretary Ben Carson told members of the House Financial Services Committee that HUD is already working with the Department of Justice to address the “ridiculous” rise of DOJ enforcement in Federal Housing Administration lending.
“We are already addressing that problem; our staff, along with the DOJ staff. And we’re committed to getting that resolved, because it’s ridiculous, quite frankly,” Carson said of the use of the False Claims Act to go after FHA lenders, a practice that rose significantly during the Obama administration.
“And I’m not exactly sure why there had been such an escalation previously, but the long-term effects of that escalation is obviously providing fewer appropriate choices for consumers,” Carson added. “And that’s exactly the opposite of what we should be doing.”
Speaking Monday during the morning general session at the Mortgage Bankers Association Annual Conference in Denver, Carson provided the attendees with more information on what exactly that joint HUD-DOJ effort is going to look like.
“We have heard concerns on the part of some in the lender community about participating fully in our programs because of the undue risks they perceive from a lack of clarity in what we expect and exposure to outsized liability from immaterial errors,” Carson said Monday.
“Lenders have rightly pointed out that absolute perfection in the lending process cannot be achieved, and that borrowers bear the costs of compliance through higher mortgage rates,” Carson continued. “Other sectors of the market have made real progress in addressing these issues, creating more confidence to lend.”
Then Carson did what normally doesn’t happen in speeches like these: He made an announcement.
“We have heard these concerns, and today I am very pleased to announce that HUD, in consultation with the Justice Department, is committed to reviewing and addressing these issues,” Carson told the crowd, which greeted his announcement with applause.
Carson said that part of this process will include a review by the FHA of its lender certifications and the implementation of the defect taxonomy.
“HUD’s objective from this effort is simple. We want every good lender who makes responsible loans, and services them well, to feel confident that they can participate fully in HUD’s programs, serving borrowers and enabling housing to continue to spur our economy,” Carson said.
But Carson said that while HUD and DOJ are working on FHA lending enforcement, it doesn’t mean that HUD will turn a blind eye to bad actors in the industry.
“There should be no lack of clarity about one key point: there will continue to be no room at FHA or Ginnie Mae for bad actors,” Carson said.
“We are not open for business to fraudsters, those without proper controls, or those who do not take their obligations in our market seriously. They will be found out and held accountable,” Carson continued. “We must do this to protect taxpayers and the fiscal integrity of FHA and Ginnie Mae.”
Carson noted the ongoing efforts from Ginnie Mae and Department of Veterans Affairs to address mortgage lenders that are aggressively targeting servicemembers and military veterans for quick and potentially risky refinances of their mortgages.
Carson also called on the members of the MBA to help in the effort to address how the DOJ handles FHA lending enforcement.
“This review will benefit greatly from the extensive feedback received from lenders, and other stakeholders, in our request for input on regulatory reform conducted in response to the president’s executive orders on burdensome regulations,” Carson said. “Your feedback and recommendations will be invaluable.”