A recent review by the Department of Housing and Urban Development (HUD), Office of Inspector General (OIG) of the largest Section 184 Indian Home Loan Guarantee lender found that the lender did not always follow program requirements.
HUD OIG made three recommendations in light of the findings of the investigation.
The lender, Mid America Mortgage’s 1st Tribal Lending, was found to not always underwrite Section 184 loans in accordance with program requirements. It also did not always follow HUD’s quality control requirements when reviewing loan files.
“This condition occurred because the lender did not always exercise due diligence when underwriting loans and did not strictly follow HUD’s underwriting and quality control requirements,” the report stated. “As a result, there was an increased risk to the Section 184 program and HUD’s Loan Guarantee Fund.”
HUD OIG found 11 loans with material deficiencies and recommended indemnification for seven loans. The seven loans totaled $1.3 million, with an estimated potential loss to HUD of $607,598.
The three recommendations from HUD OIG were:
- Request indemnification for seven of the 11 loans that had material underwriting deficiencies and had an unpaid mortgage balance of $1.3 million with an estimated potential loss to HUD of $607,598;
- Require the lender to develop and implement enhanced policies and procedures to ensure electronic signatures from borrowers are properly supported; and
- Require the lender to fully implement its quality control plan with respect to reverifications and provide HUD with periodic reports for 12 months to ensure that its quality control reviews are conducted in accordance with the requirements.