Federal housing officials who are supposed to monitor thousands of government-backed loans worth tens of millions of dollars, aren’t.
That’s why the U.S. Department of Housing and Urban Development wrongly approved 3,845 housing loans worth an estimated $705 million for Native Americans through a special mortgage program, according to HUD’s Inspector General. Not fixing the problem costs taxpayers $77 million or more every year.
“This lack of oversight and high incidence of poorly underwritten loans has the potential to negatively impact the financial standing of Native American communities,” the IG’s office said.
Taxpayers take the hit when borrowers default on such loans because they are federally guaranteed. The guarantee removes risk for the private lenders but increases financial burdens on taxpayers.
The loans are high-risk by nature, but HUD’s not reviewing most of the loans and private lenders takes the risk a notch higher, the IG said.
Only eight of the 3,447 approved loans were reviewed by HUD officials. They examined only three of the 128 lenders underwriting the loans. Two private lenders who were not on the list of approved lenders were allowed to participate in the program.
Among the loan recipients was one who was approved despite having a monthly debt-to-income, or mortgage payment-to-paycheck, ratio of 88 percent — way above the 41 percent limit.
Using a sample size of 95 loans issued from January 2010 to July 2014, the IG found that 32 of those had “material underwriting deficiencies,” and extrapolated that data over time to estimate that the office is losing $77 million annually.
Created in 1992 as a way to help members of federally recognized tribes get mortgages they might not otherwise be able to get, the program has guaranteed more than 25,000 loans worth valued in excess of $4 billion.
Roger Boyd, HUD’s deputy assistance secretary for Native-American programs, conceded there’s “significant room for improvement,” but disputed the IG’s projected annual loss.
Content created by The Daily Caller News Foundation is available without charge to any eligible news publisher that can provide a large audience. For licensing opportunities of our original content, please contact firstname.lastname@example.org.