Dealing With Signs of Fraud in FHA Loans
How dead would the housing market be if buyers could not turn to the Federal Housing Administration's mortgage insurance program? Low-down-payment mortgages insured by FHA account for nearly a third of all mortgage loans being made now. But there are worrisome signs that the program is being seriously abused, according to a report in Sunday's Post by Dina ElBoghdady and Dan Keating.
Most alarming was their finding that in the past year, the number of borrowers who failed to make a single payment before defaulting on the loans has nearly tripled. The story quoted Kenneth Donohue, the inspector general for the Department of Housing and Urban Development, which includes FHA, as saying an immediate default "clearly suggests impropriety and fraudulent activity."
In response to the story, FHA spokesman Brian Sullivan said that while the agency is managing the extra risks inherent in lending to borrowers with low down payments, they have been asking Congress to boost funding to look for fraud and non-compliance with its lending rules. "We need more money for systems and people," he said. "You need eyeballs, and you need technology."
He pointed to a frustrating glitch in the way some anti-fraud money was already given to FHA. Last summer when Congress approved funding for the ill-fated Hope for Homeowners refinance program, which almost no one has used successfully, it allowed FHA to buy state-of-the-art fraud-detection computer software. But, because of the way the law was written, that software cannot be used for other FHA activities. "By law we can only use it for a program that is not being used," Sullivan said.
Here's one way to get more eyeballs trained on instances of fraud and abuse: If you suspect a problem, contact the OIG Hotline, run by the HUD's Office of the Inspector General. You can call them at 800-347-3735, or e-mail to firstname.lastname@example.org. On the Inspector General's Web site you can download a form for sending in anonymous tips.
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