Stronger Internal Controls Over HUD Single-Family Mortgage Insurance Programs Would Discourage Fraud
RCED-85-4
Published: May 13, 1985. Publicly Released: May 13, 1985.
Skip to Highlights
Highlights
Pursuant to a congressional request, GAO reviewed the Department of Housing and Urban Development's (HUD) home loan insurance approval procedures under the single-family mortgage insurance program.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Housing and Urban Development | The Secretary of Housing and Urban Development should develop a monitoring procedure to identify mortgages that default within a specified time after loan origination so that alleged fraudulent loan practices, such as those being investigated in Camden, New Jersey, are identified and evaluated. As appropriate, modifications should be made either to the local or national insurance practices. |
Closed – Implemented
Subsequent to the GAO report, HUD took several measures to improve its monitoring system. It implemented a system to identify mortgagees with high default rates; a system to monitor early defaults by office, mortgagee, and mortgager; instructed field staff to determine reasons for loans defaulting; and instructed its monitoring division to target lenders with high and early default rates.
|
| Department of Housing and Urban Development | The Secretary of Housing and Urban Development should revise its insurance commitment procedures to verify, by sampling, data submitted by lenders. |
Closed – Implemented
Subsequent to the GAO report, HUD improved its targeting of reviews of its mortgagee origination practices. Attention is now focused on lenders with high claim/default rates, high incidence of early defaults, and a high volume of business. More attention will be placed on programmatic problems, early defaults, investor issues, and processing deficiences.
|
| Department of Housing and Urban Development | The Secretary of Housing and Urban Development should revise its insurance procedures to independently verify credit reports that show no credit history. |
Closed – Implemented
In accordance with this recommendation, HUD instructed its field personnel to ensure themselves that credit reports showing no prior credit history are an accurate statement of the borrower's credit history.
|
| Department of Housing and Urban Development | The Secretary of Housing and Urban Development should revise its insurance commitment procedures to independently verify appraisals involving investor-owned properties if the investor had recently purchased the property. |
Closed – Implemented
HUD established procedures to verify appraisals involving investor-owned properties that were previously owned by HUD. GAO suggested that it also, as much as possible, should verify investor-owned properties not previously owned by HUD since they are also subject to fraudulent practices. In June 1986, HUD agreed to do so when possible.
|
| Department of Housing and Urban Development | The Secretary of Housing and Urban Development should revise its insurance commitment procedures to ensure that VA property appraisal data are included as part of the file documentation when HUD uses it in making the insurance commitments. |
Closed – Not Implemented
In March 1986, VA stopped issuing Certificates of Reasonable Value if there is no VA buyer. Therefore, this recommendation is no longer applicable.
|
Full Report
Office of Public Affairs
Topics
FraudHomeowners loansInternal controlsLoan defaultsMortgage loansMortgage programsMortgage protection insuranceMortgagesMortgage creditHousing