Department of Housing and Urban Development, Washington, D.C. (Source: Shutterstock)
The FHA improperly insured loans to at least 56,376 borrowers in FY18, the Department of Housing and Urban Development's Inspector General said, in a just-released report.
Those loans were worth $13 billion, the IG said.
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"FHA improperly insured loans to delinquent Federal tax debtors," the IG said. "This condition occurred because the FHA underwriting process did not require lenders to check adequate sources to identify the existence of tax debt."
In addition, the FHA insured an additional 57,918 loans worth $14.3 billion for borrowers who may not have been eligible for the loans. Those borrowers had delinquent taxes and had agreed to payment plans with the IRS. However, they may not have met FHA's requirement for three months of payments on the plan the IG said. The IG said it did not have information available about whether those payments were made.
The Government Accountability Office cited this problem as far back as 2012, the IG said, in recommending that FHA require lenders to obtain borrowers' consent to verify the existence of delinquent taxes with the IRS during loan origination. And any applicant who does not meet the FHA criteria should not receive a loan, the IG continued.
In a response to the IG report, the FHA "agreed that procedures must be enhanced to screen borrowers for loan eligibility."
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