- Jun 6, 2007
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The FHA, Federal Housing Administration, is an important entity in the housing market, it insures loans that homeowners take out for their homes so if the homeowner defaults on the loan the FHA will pay the owner of the loan the balance of the loan debt; without the FHA a lot less people would be buying homes and home prices wouldn't be as high as they are and employment in the home construction industry would be less and this impact would be considerable if a scenario like this happened during times like now in which latest estimates are that the FHA insures about 33 % of home loans made.
So it really doesn't make a lot of sense the FHA's new broker policy which it is about to implement. An insurance broker is a midddleman between home loan burrowers and home loan lenders. When a person is seeking to buy a home they contact a broker who will find a lender that will loan that person the money they need to buy the home they wish to buy. The broker is important because the broker is responsible for checking the documentation for the borrower's income and that the home appraisal is legitimate things like that; this turned out to be pretty important in the last three years because this so called home loan underwriting concerns was a major cause of the "great" recession. Up to the current time, the FHA certified brokers and also conducted a yearly survey on FHA loans the broker was involved in the creation of. The FHA's new policy is the FHA wants to abandon certifying brokers and surveying the loans their responsible for - their rationale is that it is too expensive to conduct these broker tasks. The FHA's new policy is to put the whole burden on lenders, lenders are responsible for choosing brokers and for fraud and poor underwriting.
It is absolutely a good idea for the FHA to make sure lenders are on the hook for underwriting issues. A loan is a contract and lenders are the major party to the contract besides the burrower so they have a due diligence duty and that means a duty to check these underwriting concerns and if they fail in that duty it is only fair to hold them financially liable. However, what is a very imprudent and bad decision is for the FHA to abandon its essentially back-up systems for detecting fraud and poor underwriting. It can't be that expensive to generate a yearly report on FHA loans involving each broker and if a broker has a track record of loans defaulting at a high rate ban the FHA from insuring loans from that broker or put that broker on a list for lenders to conduct heightened scrutiny for loans involving that broker to protect the FHA from the incurrence of "defaulted on loans" and thus to protect its balance sheet. The FHA doing what it is planning to do on the broker issue is like the U.S. government "Mineral Management Services" allowing deep sea oil drilling rigs to have only "one" blowout protection device for its oil well as opposed to a back-up-system and as the American people are clearly seeing a catastrophe can quite posssibly result!
So it really doesn't make a lot of sense the FHA's new broker policy which it is about to implement. An insurance broker is a midddleman between home loan burrowers and home loan lenders. When a person is seeking to buy a home they contact a broker who will find a lender that will loan that person the money they need to buy the home they wish to buy. The broker is important because the broker is responsible for checking the documentation for the borrower's income and that the home appraisal is legitimate things like that; this turned out to be pretty important in the last three years because this so called home loan underwriting concerns was a major cause of the "great" recession. Up to the current time, the FHA certified brokers and also conducted a yearly survey on FHA loans the broker was involved in the creation of. The FHA's new policy is the FHA wants to abandon certifying brokers and surveying the loans their responsible for - their rationale is that it is too expensive to conduct these broker tasks. The FHA's new policy is to put the whole burden on lenders, lenders are responsible for choosing brokers and for fraud and poor underwriting.
It is absolutely a good idea for the FHA to make sure lenders are on the hook for underwriting issues. A loan is a contract and lenders are the major party to the contract besides the burrower so they have a due diligence duty and that means a duty to check these underwriting concerns and if they fail in that duty it is only fair to hold them financially liable. However, what is a very imprudent and bad decision is for the FHA to abandon its essentially back-up systems for detecting fraud and poor underwriting. It can't be that expensive to generate a yearly report on FHA loans involving each broker and if a broker has a track record of loans defaulting at a high rate ban the FHA from insuring loans from that broker or put that broker on a list for lenders to conduct heightened scrutiny for loans involving that broker to protect the FHA from the incurrence of "defaulted on loans" and thus to protect its balance sheet. The FHA doing what it is planning to do on the broker issue is like the U.S. government "Mineral Management Services" allowing deep sea oil drilling rigs to have only "one" blowout protection device for its oil well as opposed to a back-up-system and as the American people are clearly seeing a catastrophe can quite posssibly result!
