The Department of Housing and Urban Development is increasing its fines on residential servicers that fail to engage in loss mitigation on federally insured residential loans.Under a regulation that goes into effect in late May, HUD can impose fines of up to three times the claim amount of the mortgage. In fiscal year 2003 the average Federal Housing Administration claim was $92,254, which means some fines could be as large as $276,000. Currently, the maximum FHA penalty is $6,500 for each violation -- or $1.25 million for all violations during any one-year period. Victoria Vidal, a senior director for the Mortgage Bankers Association, said the rule "is not one of our favorites" and that such harsh penalties could ultimately "push some firms away from doing FHA servicing." (See the May 2 issue of National Mortgage News for more details.)

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