Actions against more than 100 lenders were not enough, according to a report on the oversight board for lenders that originate loans insured by the Federal Housing Administration. In other FHA news, one program reportedly uses a single loan to finance a home purchase and up to $35,000 in improvements.
Actions against more than 120 lenders over FHA violations were announced today by the U.S. Department of Housing and Urban Development's Mortgagee Review Board. The actions included withdrawn FHA approvals for 102 lenders, more than $0.5 million in indemnification payment agreements and more than $1.2 million in fines and administrative costs assessed against 24 lenders.
The actions were originally reported in the April 20 Federal Register.
But the mortgagee review board has been ineffective and slow as former subprime lenders increasingly apply subprime tactics to FHA lending, a report expected today by HUD's Office of Inspector General said, according to the Washington Post.
"The board has ruled on only 94 cases since the beginning of October even though 12,641 lenders do business with the agency, raising questions about whether the system is set up to catch abuses," the Post reported.
Increased funding for HUD and FHA under the Obama administration's 2010 budget was praised in a May 7 statement from the National Association of Realtors.
"FHA continues to fund its programs by the mortgage insurance premiums it collects," NAR President Charles McMillan said in the statement. "The president's fiscal year 2010 budget shows that FHA continues to operate without requiring a credit subsidy."
A recent letter from Promisor Asset Recovery Services warned that a restriction on flipping imposed by Mortgagee Letter 2006-14 will have a negative effect. The letter indicated that some investors legitimately acquire properties in bulk from sellers who don't want to invest in improvements to the properties. An FHA provision that the seller must have owned the property at least 90 days will hinder these investors "who are a necessary component in the Public-Private Investment Program."
Lend America announced on May 8 that it was approved by HUD to underwrite, close and insure HOPE For Homeowners loan transactions without prior HUD review. The Melville, N.Y.-based firm said it is committed to preventing 10,000 foreclosures, though it has delayed it deadline for achieving that goal.
FHA's 203 (k) Streamline Limited Repair Program has become an excellent solution in today's market, according to mortgage planner Winnie Uluocha who says he specializes in FHA rehabilitation loans. In a press release last month, Uluocha said the program uses a single loan to finance the acquisition and up to $35,000 in minor repairs and upgrades.