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Línea Directa

REPORTAR FRAUDE, DESPERDICIO O ABUSO
Marzo 01, 2011
  • Housing
2011-CF-1801
2011-cf-1801.pdf

In January 2010, the U.S. Department of Housing and Urban Development's (HUD) Office of Inspector General (OIG) began Operation Watchdog, an initiative to review the underwriting of 15 Federal Housing Administration (FHA) direct endorsement lenders having default and claim rates indicating lender performance problems. The FHA Commissioner had expressed concern regarding the increasing default and claim rates against the FHA insurance fund for failed loans, prompting this initiative.

Our review objective was to determine whether each lender underwrote its respective loans in accordance with FHA requirements. To accomplish the objective, we reviewed between 12 and 20 FHA loans underwritten by each of the 15 lenders that resulted in claims against the FHA insurance fund. We reported our results in individual memorandums to HUD. This summary memorandum compiles the results of the Operation Watchdog initiative and expresses OIG's concerns about systemic problems with the underwriting of FHA insured loans and the resulting costs to the FHA insurance fund for loans that should not have been insured.

We recommended in each of the 15 issued memorandums that HUD pursue appropriate remedies under the Program Fraud Civil Remedies Act against each lender and/or its principals for incorrectly certifying to the integrity of the data or that due diligence was exercised during the underwriting of the 140 questioned loans. These loans resulted in actual losses or were expected to result in losses to the FHA insurance fund of more than $11 million. Further, the lenders' improper certifications could result in affirmative civil enforcement actions of more than $23 million. We also recommended that HUD take appropriate administrative action against each lender and/or its principals.

Based on the overall results of the Operation Watchdog initiative and the systemic problems identified, we made an additional recommendation to HUD that it develop and implement procedures to review a statistical or risk-based selection of loans for which FHA paid a claim on the mortgage insurance within the first two years of endorsement, to verify that the loans met FHA requirements and were qualified for insurance. We further recommended that these procedures include a requirement for HUD to seek appropriate civil and administrative remedies to recover losses incurred on loans not qualified for FHA insurance.