Department of Housing and Urban Development Secretary Ben Carson recently shocked the industry by saying he is in talks to fix one of the biggest struggles for lenders operating in Federal Housing Administration lending. 

For years, the mortgage industry has taken issue with how the U.S. Department of Justice handles FHA lending enforcement, with top industry players like Quicken Loans even pushing back by taking the issue to court.

At its core, the industry disagrees with how the DOJ has used the False Claims Act to go after FHA lenders, a practice that rose significantly during the Obama administration.

Big banks have slowly pulled out of FHA lending and even threatened to leave it completely due to the excessive penalties.

And while companies like Quicken Loans have filled in the hole, it has turned into a struggle for some lenders to even originate FHA loans.

This new comment from Carson brings the potential of some much desired relief in FHA lending enforcement.

There might not be an official policy change as of yet, but the industry does have an on-the-record commitment from Carson saying he is looking into this.

“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 told members of Congress recently.

Then Carson provided more good news during a speech at the Mortgage Bankers Association Annual Conference in Denver in October.

“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 last month.

“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 at the conference.

The talks may still be in the beginning stages, but Bill Emerson, vice chairman of Rock Holdings, Quicken Loans’ parent company, told HousingWire in an interview last week that a conversation between HUD and the DOJ is a positive thing.

But regardless of the outcome, Emerson reaffirmed Quicken Loans’ commitment to fighting its case against the DOJ.

The industry has already seen the DOJ change its stance in a court case this year due to the new administration, meaning it could change its mind in its case against Quicken.

And now that Brian Montgomery could soon be confirmed to lead the FHA, the chances are higher that the administration can finally change how the FHA handles enforcement.

Outside of its own court case, Emerson touched on what it means for the industry if large banks start to jump back into FHA lending.

History shows that they won’t rush back in to FHA lending, he explained. But, he noted that having large players in the FHA space keeps the program alive. 

As for Quicken Loans, the company elected not to disclose what portion of its business is FHA lending, although Quicken is the largest FHA lender in the space.

What this potential change means for smaller players in the FHA lending space if the big banks jump back in remains to be seen, but regardless, FHA lenders could soon be operating in a whole new world.