January 10th Department of Housing and Urban Development-Office of Inspector General
In 2010 HUD launched an investigation of Residential Home Funding in Gaithersburg, MD in response to the branches usually high default rate. According to the report, RHF issued 40 FHA loans valued at 11.6 million from April through March that defaulted within the first two years. Of the 40 loans, 22 defaulted within the first 12 months of payments.
The HUD audit revealed that RHF did not obtain or provide sufficient evidence to validate the borrower's income and therefore failed to demonstrate that it insured the borrower had the capacity to make the payments. As a result of RHF's negligence, the FHA insurance fund was exposed to an unnecessarily increased risk.
In response to these findings HUD terminated RHF's FHA loan origination approval for the Washington DC district on September 30th. Furthermore, RHF was forced to indemnify 1.6 million for 5 of the defaulted loans.
For the full report please view the following link:
http://www.hud. Gov/offices/oig/reports/files/ig1031004. Pdf
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