FHA Suspension Policy Formalized (finally)
And, yes it’s long overdue – kick those cheating bastards to the curb!
“The Department of Housing and Urban Development has issued the mortgagee letter that implements the recently announced plan to suspend any Federal Housing Administration lender’s operations in a whole state or metropolitan area for six months if the company’s default rate in that area is three times the norm. According to that mortgagee letter, HUD will “systematically review” all FHA direct-endorsement lenders’ defaults and claim rates for mortgages originated in the past 24 months. These reviews will be conducted every three months. Default rates (90 days or more past due) will be based on retail and broker originations within the HUD office area, which can be a state or metropolitan area. “HUD will focus its attention on those mortgagees showing particularly high default and claim rates,” Mortgagee Letter 2010-03 says. The initial suspension threshold is 300% above the national and field office default rate. It will drop down to 250% on June 30 and to 200% at year-end. At a press conference on Jan. 20, FHA commissioner David Stevens said these suspension powers have not been use by HUD before. But he is prepared to use them use them to stop bad lending practices and to protect the FHA insurance fund. ”
