HUD Board Criticized for Rise in Repo List Properties
The U.S. Housing and Urban Development’s Mortgagee Review Board, which was launched in 1989 to monitor and sanction mortgage lenders who break the policies of the Federal Housing Administration, has been criticized by the HUD’s inspector general for its failure to monitor mortgage lenders in the midst of the exploding number of repo list properties.
The HUD inspector general reported that the review board has evaluated and issued rulings on only 94 filed cases since October while there are 12,641 mortgage lenders doing business with FHA. The board was designed to rule only on cases filed by HUD offices.
It was Republican Senator Charles Grassley of Iowa who first raised concerns about the ability of FHA to screen out mortgage lenders that contributed significantly to the glut of repo list properties. Grassley contented that the same mortgage lenders who provided subprime loans during the housing boom are the same lenders who are now enticing borrowers approaching FHA for low-down mortgage loans.
Grassley is concerned that FHA does not have policies or the resources to remove abusive mortgage lenders from its lender list. FHA has been guaranteeing mortgage loans against defaults. He reiterated the possibility that tax money is being spent to guarantee home loans provided by mortgage lenders that contributed significantly to the housing market collapse and the subsequent flood of repo list properties.
In response, HUD spokesperson Neill Coleman said the agency has been modernizing its systems and increasing its staff to cope with FHA’s increasing mortgage loan work load. He added that newly approved laws have given HUD more power to enforce regulations against abusive lenders to prevent the rise in repo list properties.
After the inspector general’s document was released, the HUD issued a report announcing that the Mortgagee Review Board recently had sanctioned more than 120 lenders. The board had canceled 102 loan approvals, had required five lenders to make payments totaling over $500,000 and had imposed penalties or administrative fees totaling over $1.2 million on 24 mortgage lenders.
Also, since October, the review board has temporarily suspended two mortgage lenders, put three on probation and barred four others from applying for FHA guarantees.
From 2004 to 2008, the board had imposed monetary sanctions totaling $28.26 million, with around $20 million involving only two mortgage lenders.
In addition, the inspector general’s document also pointed out that the sanctions imposed by the board were not aggressive enough to prevent abusive behavior, as shown in the provision of risky mortgage loans that cause large numbers of repo list properties.
