Single-Family Housing: Stronger Oversight of FHA Lenders Could Reduce HUD's Insurance Risk Page: 2 of 11
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Madame Chairman and Members of the Subcommittee:
We are here to discuss our report that you requested and are releasing today on the Department
of Housing and Urban Development's (HUD) oversight of lenders that make mortgage loans
insured by HUD's Federal Housing Administration (FHA).' During fiscal year 1999 alone, FHA
insured 1.3 million mortgages valued at about $124 billion. While FHA insures lenders against
nearly all losses resulting from foreclosed loans, it relies on the lenders to underwrite the loans
and determine their eligibility for FHA mortgage insurance.
Our review focused on the adequacy of HUD's policies and procedures for overseeing lenders.
We performed limited tests and analyses to determine whether these policies and procedures
were properly utilized to limit HUD's insurance risk.
In summary, our work revealed a number of weaknesses in the lender approval, monitoring, and
enforcement efforts performed by HUD's headquarters and its four homeownership centers.2
* HUD's process for granting FHA-approved lenders direct endorsement authority---that is, the
ability to underwrite loans and determine their eligibility for FHA mortgage insurance
without HUD's prior review-provides only limited assurance that lenders receiving this
authority are qualified.
* In addition, while HUD's homeownership centers have monitored lenders' compliance with
FHA's lending requirements, these monitoring efforts have not adequately focused on the
lenders and loans that pose the greatest insurance risks to the Department.
1Single-Family Housing: Stronger Oversight of FHA Lenders Could Reduce HUD's Insurance Risk
(GAO/RCED-00-112, Apr. 28, 2000).
2HUD's four homeownership centers administer the single-family housing functions in the 50 states, the
District of Columbia, and Puerto Rico. The centers are located in Atlanta, Georgia; Denver, Colorado;
Philadelphia, Pennsylvania, and Santa Ana, California.
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United States. General Accounting Office. Single-Family Housing: Stronger Oversight of FHA Lenders Could Reduce HUD's Insurance Risk, text, June 29, 2000; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc289910/m1/2/: accessed April 18, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.