On July 20, Federal Housing Administration (FHA) head Edward Golding issued a notice to housing finance agencies (HFAs) and lenders in response to a recent Department of Housing and Urban Development (HUD) Office of Inspector General (IG) report criticizing a lender’s participation in HFA down payment assistance (DPA) programs.

The memo asserts FHA’s support of HFA programs and that the agency believes existing rules for DPA programs provides “HFAs the discretion necessary to fund these programs appropriately.”  In addition, FHA is “taking active steps to completely resolve the issues raised in the audit and to provide proper clarity and guidance to the market.”

Earlier this month, the HUD OIG released an audit that found a private lender’s participation in single-family housing programs conducted by HFAs to be in violation of HUD lending guidelines.  In its audit Report, OIG contends that the HFA loan programs being utilized by the lender violate HUD rules for two main reasons: 1) the DPA is derived from a “premium priced mortgage”; and 2) borrowers are making a “repayment” of the DPA grant through an above-market mortgage loan rate. 

Upon learning about the draft findings of the audit, NALHFA voiced its concerns to HUD that the findings could potentially jeopardize HFA DPA programs that have been in place for more than 20 years, which are fundamentally designed to provide responsible access to credit for low- and moderate-income families.