Oct 9, 2012
HUD Clampdown on Delinquent Tax Debtors
The Federal Housing Administration (FHA) appears ready to institute a policy that would require lenders to identify delinquent tax debtors before endorsing loans requiring FHA mortgage insurance.
The U.S. Government Accountability Office (GAO) found that many first time home buyers with delinquent tax debts had been granted loans with FHA insurance in violation of FHA policy. Federal policy makes delinquent tax debtors ineligible for FHA mortgage insurance unless they repay the debt or are in a valid repayment agreement with the IRS.
The GAO made two policy recommendations:
- New requirements for lenders to collect IRS documentation for identifying unpaid federal tax
- Clarification of the requirement that lenders investigate indications of tax debt.
HUD/FHA has agreed with the recommendations.
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