Measures Unveiled to Curb Home Loan Fraud

Housing Secretary Samuel R. Pierce on Sunday announced broad measures to reduce fraud on home mortgages, particularly those insured by the Federal Housing Administration.

Pierce, implementing recommendations made by a task force he appointed, said he will order lenders to deny new loans insured by the FHA to any person who has paid a claim for a defaulted mortgage in the last three years.

Lenders will also be required to report the names of people who default on FHA-insured loans to credit bureaus, and credit checks will be required of people who seek to assume an FHA loan.

Pierce said he also plans to impose more restrictive underwriting and appraising procedures for builders and other sellers who offer financing concessions to buyers.

The task force’s recommendations were announced in April following a review of 1.7 million FHA-insured loans made since 1980. The group concluded that most FHA fraud was committed by investors, rather than people who obtained loans to buy a family home. The task force concluded that while investors received only 12% of FHA loans made last year, they accounted for 30% of defaults and claims.

Earlier this year, the Housing and Urban Development Department was investigating fraud in 30 communities involving 500 loans. Cases of fraud involving false loan applications or allowing unqualified borrowers to assume FHA mortgages were highlighted in Camden, N.J., Milwaukee, Las Vegas and Tulsa, Okla.