The Federal Housing Administration is currently reviewing all single-family loans that default during the first 24 months, according to FHA commissioner Carol Galante.
The commissioner noted the HUD inspector general has been pressing FHA to conduct reviews of all early payment defaults.
“We were able put in a very robust claims review process that meets all the IG’s recommendations and more,” Galante told Senate appropriators Wednesday afternoon.
HUD IG David Montoya is also urging FHA to take another step and require lenders to submit a certification in filing claims on defaulted loans.
FHA is required to pay claims within 30 days, which doesn’t give the agency enough time to review the loans to ensure they were properly underwritten.
The certifications would require the lenders to review the loans and certify they meet all the qualifications of properly underwritten loans. “It puts the onus back on the lender,” the IG testified.
The FHA commissioner said she is willing to consider certifications.
The inspector general is still looking at FHA lenders that made bad loans in 2007-2009 that has resulted in billions of dollars of losses to the FHA mortgage insurance fund.
While some critics claim the IG is extracting
“We are looking at other lenders and have more in the pipeline,” the HUD IG said. “We have had to turn some U.S. attorney’s offices away who would like to pursue some of these cases. But we have limited resources and there is only so much we can do.”
He stressed, however, that he is looking at lenders that displayed a “wholesale disregard” for the FHA single-family program. “We are trying to pick the worst of the worst.”
