The Nation : HUD Curbs on 9 Mortgage Firms Told

Nine mortgage companies that finance government-subsidized housing projects in so-called co-insurance programs have been suspended or are under review by the Department of Housing and Urban Development, the Washington Post reported. The agency also has imposed a four-month moratorium on approving new participants for the troubled programs, the newspaper said. Co-insurance allows private lenders to earn lucrative fees by making mortgage loans to federally backed housing projects, but HUD assumes most losses should a project default. A recent HUD inspector general’s report found that mismanagement and alleged fraud in the program is expected to cost the government millions of dollars, with nearly $700 million in mortgages in default. The program’s problems came to public attention when DRG Funding Corp. of Washington was kicked out of the program in March. Shortly afterward, two other lenders, Southwest Funding Group Inc. of Houston and Puller Mortgage Associates of Indianapolis, also were suspended. Half a dozen other firms have been placed on six-month probation or are being reviewed for fiscal irregularities.