IG: HUD 'Backed Off' Indemnification Policies

A recent survey found that mortgage lenders believe that the Department of Housing and Urban Development is "too quick" to require indemnification on FHA loans that go bad, but the chief auditor at HUD's Office of Inspector General says the agency has "backed off" and modified its policies."We are doing less and less indemnifications now," Deputy Assistant IG Robert Gwin told MortgageWire. In the past eight months, the HUD IG has reached numerous agreements with Federal Housing Administration officials regarding what underwriting and compliance issues trigger indemnification -- where the lender has to cover any losses on a loan. "Things we were asking for indemnification a year ago, we are not doing now," Mr. Gwin said in an interview. A Mortgage Bankers Association survey found that two-thirds of lenders felt they were more likely to have to indemnify an FHA loan than to repurchase a non-FHA loan.