HUD Wants New Indemnification Authority

The Department of Housing and Urban Development is asking Congress for additional authority allowing FHA to require lenders to indemnify the insurer against losses on bad loans. In testimony before the House Financial Services Committee, housing secretary Shaun Donovan said, "We are asking for additional authority for our proposals to hold FHA lenders responsible for fraud and misrepresentations by indemnifying the FHA fund." In his prepared testimony, secretary Donovan also noted that FHA's enforcement actions are presently limited to sanctioning individual lender branches. "We will be asking Congress to expand FHA's ability to hold lenders accountable nationally" across their entire branch network, the HUD secretary said. HUD is developing a "Lender Scorecard" that will summarize each FHA lender's performance. "This scorecard will be posted on our website to ensure transparency and accountability for lenders, borrowers and the market," Mr. Donovan testified.