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Línea Directa

REPORTAR FRAUDE, DESPERDICIO O ABUSO
Marzo 02, 2017
  • Housing
2017-LA-0003
2017-LA-0003.pdf

We audited the U.S. Department of Housing and Urban Development’s (HUD) oversight of Federal Housing Administration (FHA)-insured loans originated with borrower-financed downpayment assistance.  The audit was initiated based on the results from three HUD, Office of Inspector General (OIG) audits, which determined that lenders allowed FHA borrowers to finance their own downpayments through an increase in their mortgage interest rate as part of programs administered through housing finance agencies.  Our audit objective was to determine whether HUD had adequate controls to ensure that FHA-insured loans with downpayment assistance complied with HUD requirements.

HUD failed to adequately oversee more than $16.1 billion in FHA loans that may have been originated with borrower-financed downpayment assistance to ensure compliance with HUD requirements, putting the FHA Mutual Mortgage Insurance Fund at unnecessary risk.  Between October 1, 2015 and September 30, 2016, HUD guaranteed nearly $12.9 billion in FHA loans that may contain questionable downpayment assistance.  While governmental entities are not prohibited sources of downpayment assistance, the assistance provided through these programs did not comply with HUD requirements.  FHA borrowers were required to obtain a premium interest rate and, therefore, repaid the assistance through higher mortgage payments and fees.  Despite the prohibition against similar seller-funded programs, HUD’s requirements appeared to have enabled the growth of these questionable programs.  In addition, HUD did not adequately track these types of loans and review the funding structure of these programs.  Despite concerns raised by OIG, HUD failed to protect FHA borrowers against the higher monthly mortgage payments and higher fees imposed on them, which increased the risks to the FHA Insurance Fund in the event of default.

We recommend that HUD (1) reconsider its position on questioned borrower-financed downpayment assistance programs, (2) develop and implement policies and procedures to review loans with downpayment assistance, (3) develop requirements for lenders to review downpayment assistance programs, (4) require lenders to obtain a borrower certification that details borrower participation, (5) ensure that lenders enter all downpayment assistance data into FHA Connection, and (6) implement data fields where lenders would be required to enter specific downpayment assistance information.

Recommendations

Housing

  •  
    Status
      Open
      Closed
    2017-LA-0003-001-A

    Reconsider HUD’s position on questioned borrower-financed downpayment assistance programs, including an analysis of the financial impact to FHA borrowers, risk to the FHA program, and whether current statute prohibits borrower-financed downpayment assistance programs as they are currently structured.

  •  
    Status
      Open
      Closed
    2017-LA-0003-001-B
    Closed on Mayo 14, 2024

    Develop and implement policies and procedures to strengthen HUD’s comprehensive loan-level, postendorsement, and lender reviews by evaluating loans containing downpayment assistance (for example, interest rates, fees, borrower certifications, lender reviews, impact to borrower, related agreements, etc.). Policies and procedures should include evaluating the structure of downpayment assistance programs, including whether the programs’ structure and funding mechanisms comply with all HUD requirements and guidelines.

  •  
    Status
      Open
      Closed
    2017-LA-0003-001-C

    Develop specific requirements and guidance for lenders to review HFA downpayment assistance programs (for example, interest rates, fees, borrower certifications, lender reviews, impact to borrower, related agreements, etc.). Requirements and guidance should include evaluating the structure of downpayment assistance programs, including whether the programs’ structure and funding mechanisms comply with all HUD requirements and guidelines.

  •  
    Status
      Open
      Closed
    2017-LA-0003-001-D

    Require lenders to obtain a borrower certification that details their participation in an HFA downpayment assistance program, including relevant details of the specific program (for example, impact on interest rate, mortgage payments, fees, equity, acknowledgement of other less costly loan products, etc.).

  •  
    Status
      Open
      Closed
    2017-LA-0003-001-E

    Ensure that lenders enter accurate and missing downpayment assistance gift data into FHA Connection when identified by HUD.

  •  
    Status
      Open
      Closed
    2017-LA-0003-001-F

    Implement new data fields where lenders would be required to enter specific downpayment assistance information (for example, name of the source, name of assistance program, name of government entity or HFA, etc.) to allow for auditability and for HUD to generate reports and perform risk assessments.

  •  
    Status
      Open
      Closed
    2017-LA-0003-001-G

    Review fees identified in this report that were charged as part of borrower-financed downpayment assistance programs and determine whether they are reasonable or necessary. HUD should immediately notify lenders to discontinue charging any fees that are determined to be unreasonable and unnecessary.

  •  
    Status
      Open
      Closed
    2017-LA-0003-001-H

    Require any participating lender to reimburse borrowers that received an FHA loan with borrower-financed downpayment assistance for any fees that were determined to be unreasonable and unnecessary.