Housing and Urban Development Secretary Shaun Donovan is expected to tell lawmakers Wednesday that the Federal Housing Administration needs greater authority to cut off mortgage lenders with high default rates.
FHA Commissioner Dave Stevens said in an interview Tuesday that his agency, a part of HUD, is focusing on lenders that have outsized default rates. However, it can terminate a lender's authority to write FHA loans only if HUD's Mortgagee Review Board finds the lender has broken agency rules.
Such violations include approving loans that do not meet FHA requirements; failing to document the source of income to qualify for a mortgage, or the funds used to close; and omitting documentation from underwriting analysis.
"FHA needs the ability to address lenders that don't perform within any reasonable range that's acceptable," Stevens said. "We have institutions with quality performance that is unacceptable. Listen to the Secretary's testimony on Wednesday. He will address this subject."
The House Financial Services Committee
Committee members are concerned the drop in capital reserves could force the FHA to request an appropriation from Congress.
It took more than a month for FHA to go through its own bureaucratic process to
Federal prosecutors had
Lend America posted a notice on its Web site Tuesday that it has stopped originating mortgages and had ceased operations.
HUD is taking other steps to raise the bar for lenders that do business with FHA. On Monday the department