...But GAO Sees Better Risk Profile
After 13 years, the General Accountability Office has finally removed the Federal Housing Administration single-family insurance program for its list of "high risk" government programs, citing the FHA's improved oversight of lenders and appraisers.
The congressional watchdog agency also removed the Department of Housing and Urban Development's rental housing assistance programs from its high-risk list. This marks the first time since 1994 that a HUD program is not on the list that GAO auditors update every year.
HUD deputy secretary Roy Bernardi said the department had to make substantial improvements to get off the list.
In the single-family area, he noted the FHA revised the post-endorsement technical review process to place more emphasis on the risk of the loan rather than compliance with procedural and documentation requirements. "This played a significant part in getting us off the high-risk list," Mr. Bernardi said.
The FHA now rates loans as "acceptable" and "unacceptable." On any loan rated unacceptable, the lender knows they have to indemnify the FHA for any losses.
HUD officials believe the FHA now is on sound footing as they try once again to persuade Congress to pass legislation that would modernizing the FHA single-family program. (c) 2007 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com