FHA mortgage ‘instant defaults’ mounting
WASHINGTON – March 9, 2009 – A rash of “instant defaults” in recently issued Federal Housing Administration mortgages is due to foul play among unscrupulous lenders, officials say.
An analysis of available data by The Washington Post Sunday indicated in the past year, the number of borrowers who were unable to make more than a single payment before defaulting on their FHA-backed mortgages has nearly tripled, a rate that far outpaces the agency’s overall growth in new loans.
Industry experts are chalking the instant defaults up to the weak economy, poor scrutiny of prospective borrowers and mostly to the suspect actions of unscrupulous lenders looking to make a quick buck, the newspaper said.
Kenneth Donohue, inspector general of the U.S. Department of Housing and Urban Development, said if a loan “is going into default immediately, it clearly suggests impropriety and fraudulent activity.”
The pattern is similar to the collapse of the subprime mortgage lending market that triggered the global financial crisis, except that with the FHA-backed loans, the U.S. Congress would have to bail out the lenders if the FHA cannot make good on guarantees from its existing reserves, the Post said.
Copyright © 2009 by United Press International.
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