Industry NewsMortgage

Defaults, fraud drain FHA fund

Learn the New Luxury Playbook at Luxury Connect | October 18-19 at the Beverly Hills Hotel

A surge in demand for FHA-backed loans is likely to overtax the oversight resources of the Federal Housing Administration, making the program more vulnerable to fraud schemes, HUD's inspector general told lawmakers this week.The growth in demand -- FHA backed $71.7 billion in single-family mortgages in the first three months of the year, up 245 percent from a year ago -- comes as delinquencies and foreclosures hit new highs, threatening to deplete the FHA's insurance fund below statutory minimums for the first time since 1934.The FHA insurance program has always been self-sustaining, relying on premiums paid to the fund to cover losses due to fluctuating defaults and foreclosures.If the fund falls below levels mandated by Congress, that would require an increase in premiums or an injection in taxpayer dollars to make up the shortfall, said Kenneth Donohue, inspector general of the Department of Housing and Urban Development.FHA-backed loans accounted for about one in five purchase loan...