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Ineligible Borrowers Got Hundreds of Millions in Stimulus Home Loans
Posted By Lachlan Markay On July 5, 2012 @ 11:13 am In Ongoing Priorities,Scribe | Comments Disabled
The Agriculture Department’s Rural Housing Service likely loaned hundreds of millions of dollars to ineligible borrowers as part of President Obama’s stimulus package, a report by federal watchdogs has revealed.
The stimulus earmarked more than $1 billion for RHS home loans in rural communities. According to the Ag Department’s Inspector General, up to $292.3 million of those loans may have financed ineligible projects, or gone to borrowers that did not meet the loan program’s requirements due to their potential inability to repay the loans.
The IG examined a sample of 100 RHS stimulus loans, and found that 17 had been extended to borrowers who “(1) had no history of stable and dependable income, (2) had a credit history that did not indicate the ability and willingness to repay a loan, or (3) did not meet repayment ability guidelines.”
Six loans in the report’s sample financed properties that did not meet the program’s eligibility requirements. Some “lacked sufficient documentation that the homes were decent, safe, and sanitary,” according to the report.
The IG extrapolated with 95% certainty that between 1,111 and 2,433 loans totaling between $124.3 million and $292.3 were made to ineligible borrowers or projects. The report faulted RHS personnel for the oversight.
Rural Development field-level personnel made these questionable determinations because they were not sufficiently trained on how to either conduct or adequately document proper determinations; did not have an effective second party review process in place to catch errors; and did not have sufficient guidance on the characteristics and requirements needed for a property to become eligible. Rural Development conducted a follow-up review of the questionable loans and agreed that they were not fully processed in accordance with regulations or handbook requirements.
Read the entire report here:
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