The Office of Inspector General ("OIG") of the U.S. Department of Housing and Urban Development ("HUD") audited loans insured by the Federal Housing Administration from calendar year 2016 to determine whether the FHA insured loans to borrowers with delinquent federal debt or who were subject to federal administrative offset for delinquent child support.
Federal law prohibits loans, loan guarantees, or insurance to delinquent federal debtors. It also prohibits loans, loan guarantees, or insurance to borrowers with delinquent child support subject to administrative offset.
The OIG said that it found that the FHA insured an estimated 9,507 loans worth $1.9 billion that were not eligible for insurance because they were made to borrowers with delinquent federal debt or who were subject to federal administrative offset for delinquent child support.
The OIG recommended that the FHA put $1.9 billion "to better use by developing a method for using the Do Not Pay portal to identify delinquent child support and delinquent [f]ederal debt to prevent future FHA loans to ineligible borrowers."
It also recommend that the FHA revise the single-family handbook to comply with the regulation that prevents loans to borrowers with delinquent child support subject to federal offset and schedule the timely renewal of data-sharing agreements to prevent data loss in the Credit Alert Interactive Voice Response System ("CAIVRS") or that it discontinue use of CAIVRS if the information duplicates the information available in the Do Not Pay portal.