The U.S. Department of Housing and Urban Development's (HUD) inspector general has determined that Cheshire, Conn.-based Webster Bank did not underwrite at least six loans in accordance with HUD's guidelines. As a result, the Federal Housing Administration's (FHA) insurance fund incurred actual losses of more than $450,000 on five of the loans and faces a potential loss of more than $60,000 on another.
The inspector general's report was issued Sept. 1 and is part of the agency's Operation Watchdog initiative. Announced in January, this initiative is a review of the underwriting procedures for 15 direct endorsement lenders with high claim rates against the FHA insurance fund for failed loans.
Twenty of Webster Bank's FHA loans were reviewed as part of the process.
HUD's Office of the Inspector General has recommended that the agency pursue civil money penalties against Webster Bank and/or its principals, as well as take administrative actions.