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The U.S. Department of Housing Urban Development (HUD), Office of Inspector General audited the Government National Mortgage Association’s (Ginnie Mae) process for identifying and removing uninsured single-family Federal Housing Administration loans from mortgage-backed securities (MBS) pools.  Our audit objective was to determine whether loans remained in Ginnie Mae MBS pools for 1 year or longer without the required mortgage insurance.

Ginnie Mae allowed at least 345 uninsured single-family loans valued at nearly $50 million to remain in its MBS pools for more than 1 year.  We reviewed a statistical sample of 85 of 363 pooled loans for which the U.S. Department of Housing and Urban Development’s systems showed no insurance endorsement date.  Eighty-three of the loans were uninsured more than 1 year after the lenders issued the related securities.

We recommend that Ginnie Mae (1) establish a maximum time that loans may remain pooled without insurance and (2) establish a process for requiring removal of pooled loans that remain uninsured at the maximum time  to put $49.3 million to better use.