The Federal Housing Administration Needs Clearer Criteria for Underwriting Single-Family Mortgages Insurance
CED-78-59: Published: Mar 13, 1978. Publicly Released: Dec 3, 1982.
- Full Report:
The single-family home underwriting practices of the Federal Housing Administration (FHA) in the New York area office were reviewed. In three Brooklyn neighborhoods, the volume of approvals and disapprovals for single-family mortgage insurance from May 1, 1976, to April 30, 1977, were determined, and the FHA underwriting criteria were identified.
In the designated neighborhoods, FHA personnel: rejected applications in the initial screening process because, based on outdated surveys and without making individual inspections, the locations were considered unacceptable; inconsistently applied the underwriting criteria in rejecting applicants after the initial screening process; and in some cases, did not follow existing criteria. Inconsistencies in the interpretation and application of underwriting criteria by the New York area office appear to be the result of insufficient guidance from Department of Housing and Urban Development headquarters in Washington.
Recommendation for Executive Action
Comments: Please call 202/512-6100 for additional information.
Recommendation: To assure consistency in underwriting practices nationwide, the Secretary of Housing and Urban Development should direct FHA to clarify existing underwriting criteria governing location and property analysis. FHA should be directed to define deferred maintenance, major repairs, and livability conditions used to approve or reject insurance applications and better define when the correction of these elements can be made a condition for mortgage insurance application approval.