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.

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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the designated neighborhoods, FHA personnel: rejected applications in the initial screening process because, based on outdated surveys and without making individual inspections, the locations were considered unacceptable; inconsistently applied the underwriting criteria in rejecting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.

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