Saturday, September 11, 2010

Sept 11: Executives with criminal records slip through FHA crackdown, documents show

Executives with criminal records slip through FHA crackdown, documents show: "But documents and interviews reveal that more than 34,000 home loans have been issued over the past two years by a dozen FHA-approved lenders that have employed people who were convicted of felonies, banned from the securities industry or previously worked for firms barred by the agency.

More than 3,000 of those loans, about 9 percent, were seriously delinquent or already a claim on the FHA insurance fund as of June 30. That's nearly triple the rate for all loans made by FHA lenders over the past two years, about 3.4 million.

Compared with other regulators, critics of the FHA say it rarely cracks down on company executives. 'In the securities industry, you bar people for life. You don't see that a lot with the FHA,' says Mark Calabria, director for financial regulation studies at the Cato Institute.

Policing the cubicles and corner suites of FHA lenders is crucial because the agency, which encourages home ownership by insuring mortgages made by qualified lenders, has become a cornerstone of the U.S. housing market. Its portfolio of guaranteed loans has grown to $800 billion in March from $466 billion in fiscal 2008. The agency's insurance program is financed by premiums paid by FHA borrowers, but taxpayers would be on the line if those funds are depleted."
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