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                                      FHA Probes "Excessive Default" Mortgagees
                                                             and our
                                        Solution to Reduce High Compare Ratios



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On January 13, 2010, Federal Housing Administration (FHA) Commissioner David H. Stevens announced an initiative focusing on mortgage companies with significant claim rates against the Federal Housing Administration mortgage insurance program.

On January 12, 2010, HUD Office of Inspector General (OIG)  issued a public notice that subpoenas were served to the corporate offices of 15 mortgage companies across the country, demanding documents and data related to failed loans which resulted in claims paid out by the FHA mortgage insurance fund.

Some actions available to the HUD OIG are audits, investigations, and inspections and evaluations. HUD will rely on the support of the Department of Justice, to pursue both civil and criminal legal actions against wrongdoers, and of state and local law enforcement. HUD can proceed with administrative sanctions such as suspensions, limited denial of participation, debarment, and civil monetary penalties.

Excessive Defaults and High Compare Ratios

The probe will be conducted by the HUD OIG's Audit and Investigation staff jointly. They will assess why these companies have high default rates.

This probe is a new type of approach in which HUD OIG is focused on corporate offices rather than individual branch offices.

An indicator of excessive defaults and claims is the FHA Compare Ratio statistic. When a compare ratio is above 150, HUD begins a due diligence process. (The compare ratio is the percentage of originations which are currently in default or were "claim terminated" divided by the percent of originations which are currently in default or were claim terminated for the selected geographic area.)

The Compare Ratio provides a value that reveals the largest discrepancies between the mortgagee's default and claim percentage and the default and
claim percentage to which it is being compared. Any mortgagee with a compare ratio of greater than 200 is subject to disciplinary review and possible loss of FHA approval.

Our Solution - Reduce Compare Ratios

Our "task force" operational unit is designed to reduce high
 Compare Ratios caused by excessive defaults and claims.

Task Force Description
  • Staffed with subject matter experts and skilled auditors
  • Specially designed checklists and automated file screening systems
  • State-of-the-art quality control, compliance, forensics, and modern research facility
  • Scalable up to virtually any size default and claims experience
  • Upload/download large file formats for prompt reviews
  • Located in a secured and safe audit location
Our Remedy
  • Comprehensive review of existing defaults and claims for loss mitigation  and loan modification eligibility
  • HUD-FHA and regulatory compliance guidance for the mortgagee
  • Notification to mortgagee of borrower's loss mitigation eligibility
  • Notification of loss mitigation eligibility to the borrower
  • Referrals to expert, nationwide legal counsel to handle loss mitigation and loan modification strategies
  • Monitoring of loss mitigation applications in process
  • Follow-up with servicers to assure proper and timely resolution and notification to HUD-FHA
  • On-going review and loss mitigation of new defaults and claims

Call Today: 516-442-3456 - Ext: 204 "Task Force"
 Visit our Library for Issuance      Action Button Image 1                   

HUD Insp
ector General Probes Mortgage Companies with Significant Claim Rates - HUD OIG No. 2010-01, January 12, 2010

Memorandum from FHA Commissioner David H. Stevens - January 13, 2010

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