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Borrowers Now Flocking to the Feds to Default on Loans
Same cause of subprime mess blamed for new threats to taxpayers
By Wesley Oliver
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Posted Mar 8, 09 1:13 PM CDT
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(Newser)
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History is repeating itself, and taxpayers will be footing the bill for it: Flawed lending practices are enabling borrowers to receive mortgage loans they can’t repay—but this time, Washington’s involved, the Washington Post reports. Many of the loans provided by the Federal Housing Administration default after just one payment, which “clearly suggests impropriety and fraudulent activity,” said one official.
The FHA backs nearly a third of mortgages made, and the rate of instant defaults has tripled within a year. Lenders are pressured to approve loans quickly, but the agency, which finances them, doesn’t have the staff to efficiently investigate scammers. One former official said Washington hasn’t done “anything significant in the past two years to tighten up its lending.”