WASHINGTON — Key Democratic lawmakers are raising concerns about a Federal Housing Administration proposal that could make it easier for major banks that plead guilty to felony changes to continue originating FHA-insured loans.

Sens. Sherrod Brown, D-Ohio, Elizabeth Warren, D-Mass, and Rep. Maxine Waters, D-Calif., are urging the Department of Housing and Urban Development to withdraw the FHA loan certification proposal — that was released for comment on May 15 — and reissue it with clearer descriptions of changes to the loan certification form. The proposal "fails to even describe the changes to the certifications of illegal conduct — let alone offer a rationale for them," the three lawmakers said in a July 14 letter to HUD secretary Julian Castro and Office of Management and Budget Director Shaun Donovan. (Donovan is a former HUD secretary.)

FHA lenders are currently required to sign a certification along with each loan application to demonstrate that the loan officer, the mortgage firm or its principals have not been indicted or convicted for a variety of offenses.

The lawmakers claimed major FHA lenders could potentially evade the requirement for certain offenses. For example, recent guilty pleas by JPMorgan Chase and Citigroup to charges for manipulating currencies should disqualify them from being able to sign the existing loan-level certification form, the lawmakers said. But the three Democrats noted that those offenses would not be included as part of the proposed certification form because it deletes statutes dealing with antitrust violations. 

"HUD's proposed changes appear to effectively waive a contractual obligation for obtaining FHA insurance for a mortgage and allow HUD to turn a blind eye to... criminal violations — putting home buyers and taxpayers at additional risk," the three lawmakers wrote.

A department spokesman said, "HUD has received the letter and will respond accordingly."

"This administration has taken extraordinary steps to hold lenders accountable for their actions that helped lead to the economic crisis," the spokesman said.

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