Borrowers Now Flocking to the Feds to Default on Loans

Same cause of subprime mess blamed for new threats to taxpayers
By Wesley Oliver,  Newser Staff
Posted Mar 8, 2009 1:13 PM CDT
Borrowers Now Flocking to the Feds to Default on Loans
Real estate sings mounted on homes are shown in Philadelphia, Thursday, Aug. 16, 2007.   (AP Photo/Matt Rourke)

(Newser) – 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.

story continues below

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.”
(Read more Federal Housing Administration stories.)

We use cookies. By Clicking "OK" or any content on this site, you agree to allow cookies to be placed. Read more in our privacy policy.
Get the news faster.
Tap to install our app.
Install the Newser News app
in two easy steps:
1. Tap in your navigation bar.
2. Tap to Add to Home Screen.