Require lenders to obtain the borrowers’ consent to verify the existence of delinquent Federal taxes with the IRS during loan origination and deny any applicant with delinquent Federal tax debt and no payment plan or a noncompliant payment plan or an applicant refusing to provide consent from receiving FHA insurance to put at least $6.1 billion to better use by avoiding potential future costs to the FHA insurance fund.

Status

The Office of Single Family Housing will need additional tax information from the Internal Revenue Service to complete the planned action. In July 2024, Single Family Housing proposed closing the recommendation with no action because the primary action discussed would require Congressional authorization, and another option discussed would place an undue burden on borrowers and lenders and was not practical. OIG disagreed with the request. Since delinquent tax debtors are ineligible for FHA loans under existing FHA and OMB guidelines, OIG will continue to work with Single Family Housing on a solution.

Analysis

To fully address this recommendation, HUD will need to provide evidence that it established a method of borrower consent to verify the existence of delinquent federal taxes.

Implementation of this rule should result in HUD putting $6.1 billion to better use.