Report details HUD failures to protect FHA insurance fund from bad loans

The Housing Wire reports:

The Department of Housing and Urban Development missed critical chances to recover up to $11 million in losses to the Federal Housing Administration's insurance fund on bad mortgage loans, according to a report from HUD's Office of Inspector General.

The Inspector General raises 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."The office's Operation Watchdog initiative began last year to review the underwriting of 15 FHA direct endorsement lenders with default and claim rates outside the norm.

The Office of Inspector General found these lenders did not properly underwrite 140 of 284 loans reviewed, or 49%, because they weren’t following FHA requirements.

It's time to separate housing from state.