The U. S. Department of Housing and Urban - Office of Inspector General audited the Federal Housing Administration’s (FHA) Title II single-family lender renewal process. Our objective was to determine whether FHA’s Lender Approval and Recertification Division’s (Division) controls were adequate for determining whether lenders met FHA annual renewal requirements.

The Division had taken significant steps to strengthen its controls over the lender renewal process; however, additional improvements are needed. The process still had weaknesses related to Mortgagee Review Board referrals, lender financial information review, and data and renewal fee calculations in the Division’s lender recertification tracking system. These weaknesses resulted in an increased risk that noncompliant lenders were allowed to continue participating in the FHA program, the Division being less able to effectively monitor lenders, and lenders paying lower fees than required.

We recommend that the Deputy Assistant Secretary for Single Family Housing require the Division to improve controls over the lender recertification process and make changes to the Institutional Master File system to ensure data integrity.