Congress and the White House have advocated several ways to help struggling homeowners, most of them centering on the Federal Housing Administration, a Depression-era agency that is part of the Department of Housing and Urban Development (HUD). Many policy initiatives have put forth ideas to alleviate the subprime mortgage debacle that has rippled through the economy.
Steven Preston, who had been SBA administrator since 2006, was sworn in as HUD secretary on June 6. The president nominated Preston to restore relations between HUD and Congress—as the administration continues to press Congress to clear an FHA overhaul that could enable the agency to help more borrowers refinance into governmentinsured loans.
Last year, before the subprime crisis came to the fore, the House passed an FHA bill containing a provision strongly opposed by the AICPA because it would unwisely lower broker standards and result in higher FHA defaults and greater taxpayer risk. The provision would allow a correspondent lender or mortgage broker to post a surety bond, in lieu of any requirement to provide audited financial statements or meet a minimum net worth requirement.
The Senate passed its own version of FHA reform last year. It does not lower standards for brokers. It keeps the FHA requirement for financial statement audits intact.
The AICPA has joined with several other financial services associations, and we have been active in reminding the key players in the House and Senate the reasons the House broker language must be omitted from the final bill. The HUD inspector general issued a strong letter in defense of these audits.
In April, the Senate passed a bill that would help lessen foreclosures. The bill contains a section on FHA modernization, and it does not change the audit requirement.
The Washington Post featured a column discussing how mortgage brokers are trying to enrich themselves at the expense of taxpayers by not having to incur the cost of a yearly financial statement audit. In addition, five consumer groups have sent a letter supporting the retention of the audit requirement. We believe that, given the current housing crisis, the financial statement audit should remain in effect for the federal government’s mortgage insurer.