UPDATED: SENATE PASSES SHAHEEN BUDGET AMENDMENT TO INCREASE OVERSIGHT AND PROTECT TAXPAYERS FROM FRAUDULENT FHA MORTGAGE LENDERS

(Washington, D.C.) – U.S. Senator Jeanne Shaheen applauded Senate passage today of her deficit-neutral amendment to the Senate budget resolution to help protect taxpayers from the growing foreclosure crisis by enhancing the Department of Housing and Urban Development’s (HUD) ability to investigate and remove fraudulent mortgage lenders from Federal Housing Administration (FHA) programs. The number of FHA-insured mortgages has grown dramatically in recent years, but HUD’s ability to detect and remove fraudulent lenders in FHA programs has remained stagnant. The Shaheen amendment, which was co-sponsored by Senators Gregg (R-NH), Mikulski (D-MD) and Kaufman (D-DE) and passed the Senate by unanimous consent, will increase transparency and oversight of FHA programs by creating a deficit-neutral reserve fund to help HUD monitor and remove suspicious lenders from FHA programs.

“I’m glad my colleagues in the Senate joined in passing this important amendment to help increase the oversight and accountability of FHA programs and to help protect taxpayers by enhancing HUD’s ability to investigate fraudulent lenders and remove them from taxpayer-backed programs,” said Shaheen. “In the run-up to the subprime crisis, many fraudulent lenders pushed borrowers into mortgages and refinancings that they could not afford in order to collect commissions and fees. We need to make sure that we prevent that activity from migrating to federally insured loans, and this amendment is a big step toward achieving that goal.”

The number of FHA-approved lenders has doubled over the past two years, and the FHA now insures one-third of all new mortgages. Recent reports of a rise in borrowers who haven’t made even one payment suggest that fraudulent activity has increased among FHA-backed loans, potentially putting taxpayers on the hook for fraudulent lending practices. Shaheen’s amendment will help protect taxpayers from fraudulent lending activity by creating a deficit-neutral reserve fund within HUD to increase the capacity of HUD’s Inspector General to investigate cases of FHA loan fraud.