The Federal Housing Administration is making it easier for small banks, thrifts and credit unions to participate in its single-family loan program again.

In a recent letter, FHA said it is dropping a requirement that small federally regulated depositories submit annual internal control and compliance reports. Those reports require management to hire accountants or auditing firms, which is expensive for many institutions that originate just a handful of FHA loans each year.

Some banks that were approved mortgagees dropped out of the FHA program because they couldn't afford it, according to Ron Haynie, the executive vice president at ICBA Mortgage Services, an arm of the Independent Community Bankers of America.

Back in 2009, FHA cracked down on small depositories by requiring them to submit audited financial reports as well as internal control and compliance reports.

Under pressure from bank and credit union trade groups, FHA decided in April 2011 to allow community institutions to submit their unaudited call reports required by their federal regulators in lieu of financial reports prepared by independent accountants. In late December, FHA dropped the other audit requirement.

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