VA and HUD Can Improve Service and Reduce Processing Costs in Insuring Home Mortgage Loans

AFMD-82-15: Published: Jun 11, 1982. Publicly Released: Jun 11, 1982.

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GAO reviewed the underwriting activities used by the Veterans Administration (VA) and the Department of Housing and Urban Development (HUD) to grant and insure mortgage loans.

A large portion of the processing costs incurred by VA and HUD in insuring loans involves underwriting. VA and HUD rely mostly on their own staffs for underwriting rather than on lenders. By relying more on approved lenders, when practical, to perform the required underwriting activities, VA and HUD could save several million dollars annually and improve service to their borrowers without increasing their insurance risk. Approximately 40 percent of insured loans could be processed under delegated authority procedures. GAO believes that the agencies' control systems over lender underwriting activities, if properly adhered to, are adequate to minimize the risk of relying on approved lenders to perform the entire underwriting function. By having the agencies select the appraisers and make a field review of a sample of appraisals, protection would be provided against overvaluation of property.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Administrator of Veterans Affairs should obtain participation from more lenders in its automatic lender procedure.

    Agency Affected: Veterans Administration

  2. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of HUD should extend HUD-delegated processing authority nationwide and encourage qualified lenders to participate by eliminating the outreach requirement.

    Agency Affected: Department of Housing and Urban Development

  3. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of HUD should establish a system for assessing and reporting on the quality of lender performance.

    Agency Affected: Department of Housing and Urban Development

  4. Status: Closed - Not Implemented

    Comments: VA disagrees with the recommendation to have property values determined by lenders.

    Recommendation: The Administrator of Veterans Affairs should extend coverage of its automatic lender procedures to include determination of property values based on appraisals by VA approved appraisers.

    Agency Affected: Veterans Administration

 

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