When a servicer has a high re-default rate on modified loans, Federal Housing Administration should be able to transfer the servicing to a better servicer, according to FHA commissioner Carol Galante.
In testifying before Senate appropriators, Galante noted that some servicers seem to be “following the individual steps” when it comes to modifying loans. But they are not having good outcomes for the borrowers compared to other servicers
“If they can’t perform at a certain level,” she said, FHA should have the power to transfer servicing to another servicer or subservicer.
However, FHA does not have the statutory authority to compel a servicer to transfer servicing, according to a Department of Housing and Urban Development spokesman. “Therefore, we need such authority granted via a legislative change,” he said.
HUD Inspector General David Montoya told the senators he would support giving FHA that statutory authority.
“We would certainly support that to keep additional losses from occurring” to the FHA mortgage insurance fund,” the IG said. It would be beneficial “not only for the fund but for the communities that they service and individual being impacted by these issues.”
Montoya also told the Senate appropriators that he may initiate audits of FHA servicers later this year.
“It is not something we have audited, although we are contemplating to do that later this year,” he said.