A federal watchdog says the FHA insured thousands of loans it shouldn’t have
The Federal Housing Administration insured $1.9 billion worth of ineligible loans in 2016, according to a federal watchdog.
The Department of Housing and Urban Development’s Office of Inspector General (OIG) recently issued the results of an audit it conducted to determine whether the FHA insured loans to borrowers with delinquent federal debt or who were subject to federal administrative offset for delinquent child support. The audit found that the agency had insured about 9,507 loans, worth $1.9 billion, that weren’t eligible for FHA insurance.
To arrive at the conclusion, the OIG reviewed a statistical sample of 60 loans that also had data on their borrowers in the Bureau of Fiscal Service’s “Do Not Pay” database. The database allows federal agencies to check before making payments or awards to identify ineligible parties.
“We verified that 47 of the 60 sample loans were made to borrowers who were barred by Federal requirements,” OIG wrote in its report on the audit. “We used these results to project the total number and value of ineligible loans insured by FHA.”
The FHA insured more than 1 million loans in 2016, with a total value of about $212 billion, according to the OIG.
The OIG recommended in its report that the $1.9 billion spent by the FHA insuring ineligible loans could be put “to better use” by “developing a method for using the Do Not Pay portal to identify delinquent child support and delinquent Federal debt to prevent future FHA loans to ineligible borrowers.”
The OIG also recommended that the FHA revise its single-family handbook to comply with regulations barring loans to borrowers with delinquent child support subject to federal offset.
