Regulator Watch: Bush Administration Wants To Tighten Its Reins on FHA Lenders.(Brief Article)

In the first outline of the President's budget priorities, the Bush administration is proposing to tighten monitoring of Federal Housing Administration single family lenders and to increase homeownership opportunities.

The budget document released last week notes that the Department of Housing and Urban Development had to implement foreclosure moratoriums last year in response to the use of FHA loans in fraudulent "property flipping" schemes.

To eliminate the need for foreclosure moratoriums or other emergency responses, the Bush administration wants HUD to strengthen FHA's internal information systems and controls.

"Inadequate information systems have weakened FHA's ability to monitor lenders that use its guarantees and contributed to HUD's failure to obtain a clean opinion from its auditors in 1999,"according to the budget document President George W. Bush sent to Congress last week.

The new administration also wants FHA to improve the loan origination process and provide "better monitoring of lenders and appraisers."

The Mortgage Bankers Association does not find this threatening, according to MBA senior staff vice president Robert O'Toole. MBA is in favor of more efficient and better monitoring systems, as well as more highly trained monitors, Mr. O'Toole said. "We are always in favor of that," he added.

The budget document released last week is called a "blueprint" and it does not provide many details about the FHA proposals or the overall HUD budget.