HUD Seeks An Additional $12.5M For Tech, Human Resources

U.S. Housing & Urban Development (HUD) Secretary Shaun Donovan told a Senate appropriations subcommittee that the Federal Housing Administration (FHA) needs additional resources to ensure the agency can continue to meet the needs of underserved borrowers during the current mortgage crisis.

Donovan appealed to Congress to appropriate an additional $12.5 million next year to allow the FHA to hire more staff to handle the surge in the agency's loan activity. The FHA's role has grown from 3% of lending activity (by dollar volume) in 2006 to approximately 30% of all mortgages originated currently.

But while the FHA is currently handling this increased loan volume and managing the accompanying risk, Donovan also cautioned about the challenges facing the mortgage insurance fund.

"Like many federal domestic agencies, FHA has suffered under the penny-wise and pound foolish priorities of the previous administration," he said. "FHA was stagnant, limiting its ability to maintain adequate staffing levels and invest in state-of-the art technology. Repeated budget stalemates and resulting uncertainty of future funding levels undermined the ability to implement long-term organizational improvements."

Donovan also testified that he recently reactivated a program to dispatch teams of investigators to conduct on-site reviews of lenders, especially those whose refinance portfolios are showing signs of distress and abnormally high default rates.

Every effort is being made to reduce risk and confront fraud in FHA's single-family mortgage insurance programs, according to Donovan.

"For FHA to realize its full potential to respond to the current mortgage crisis, it will require additional resources and development of new and innovative reform initiatives," he said. "The recent mortgage market meltdown has provided ample evidence that we must work to rethink each and every aspect of the nation's housing finance system."

In addition to the agency's normal lender-monitoring procedures, the FHA plans to increase unannounced on-site inspections of lenders to further reduce the risk of fraud.



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