Housing:

Collection of Credit Report Fees by the Farmers Home Administration

CED-77-134: Published: Oct 7, 1977. Publicly Released: Oct 7, 1977.

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The Farmers Home Administration's rural housing loan program was reviewed to determine whether it was economical and efficient. The agency has joined other governmental agencies in obtaining credit reports from credit-reporting companies which are under contract with The Department of Housing and Urban Development. The Farmers Home Administration's regulations list the credit bureaus to be used, the areas covered by each bureau, and the fees charged the Government for each report. Under the agency's current procedures, credit reports may be ordered for each rural housing loan applicant and are paid for by the agency. If the applicant is successful, he is required to pay an $8 fee for the credit report at the time the loan is closed. If unsuccessful, the applicant is not required to reimburse the agency for the cost of the credit report. In addition, the agency does not collect the actual cost of the credit report from all borrowers.

During the 12 month period ended June 30, 1977, the Farmers Home Administration lost about $721,000 by paying for the credit reports of ineligible applicants and by not collecting the actual cost of credit reports for eligible applicants. The cost of credit reports for ineligible applicants is borne by the Rural Housing Insurance Fund, which is reimbursed annually for losses through appropriations. Since 1967, the number of applications for individual housing loans withdrawn or rejected has risen sharply. As the number of withdrawn and rejected applications increased, the agency's losses on credit reports also increased. According to preliminary data from the Department of Agriculture's Office of Audit, the Farmers Home Administration paid over $2 million for credit reports on loan applicants who did not receive loans from fiscal year 1972 through fiscal year 1976.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Agriculture should require the Farmers Home Administration to charge applicants for the cost of the credit reports at the time of application. This can be in the form of a loan initiation fee sufficient to cover the basic credit report and any necessary supplemental or antecedent reports. Any difference between estimated and actual cost could be adjusted at loan closing or loan rejection.

    Agency Affected:

 

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