Home loans: FHA gets new responsibilities

The Federal Housing Administration is suddenly finding itself thrust forward into the housing arena as an insurer of mortgages and loans in these times of depression and uncertainty.  The credit crunch is still very much viable and banks continue to keep tabs on lending. In these circumstances the FHA finds itself donning the role of savior of housing sector and a rescuer of foreclosures. The new government and its administration expect the mortgage market to grow under FHA to almost fifty percent.

Ironically FHA and its parent agency, Department of Housing and Urban Development were neglected by the Bush administration. This neglect has caused both the government agencies to be under staffed. Their technology is outdated and there are doubts to whether they can shoulder such a big responsibility. The FHA had lowered its interest rates to encourage sub prime lending and to compete against private lenders. It had to pay for this by frauds that are still plaguing it.

This extraordinary challenge has to be faced by these agencies. The years of having been shunted have taken their reputations for a ride and therefore the work is all the more tedious. In the absence of a plan B and lack of time, the change over might be more difficult than expected. This is a challenge the people in the White house are facing now.

The FHA and HUD have lost many customers due to their unprofessionalism and lack of staff.  Their role till now has been minimal that they were almost non existent. This lack of confidence that the people have in them do not make them adept to stage the housing show alone. The FHA roster still has three thousand appraisers with expired licenses and two hundred having state abuse sanctions against them. The computers and software that are used are outdated. They still use programs from 1970s and 1980s. Thus the approval process for most of the programs is done almost completely as a manual task.  The FHA has only one officer who is assigned to work in cohesion with the states implementing and looking into new rules for mortgage brokers and loan officers.

The situation is such that the same sub prime lenders who were largely responsible for the present housing crisis are still finding ways to get into the FHA’s programs and this is posing risks once again. The agency is not able to identify this predatory lending. Thus the infrastructure and competency of people working for the agency comes under scrutiny. The working of the agency is such that there is neither chief risk officer nor a chief credit officer and this is jeopardizing billions of taxpayer’s dollars.

The FHA needs to develop a work culture that would be efficient enough to get the agency back to its deserved glory. The resources that it requires have to be supplied and some immediate effective actions taken to empower it. The FHA has been given an important responsibility and the whole nation is watching it. If it is able to pull this through then the people would once again start trusting it.