THEY’RE BA-ACK

Some of the same subprime lenders that were operating during the boom are back, but this time they’re pushing government-backed, FHA loans. FHA “faces a tsunami” of ex-subprime lenders who market aggressively and sometimes fraudulently, says Kenneth M. Donohue Sr., the inspector general for the U.S. Department of Housing and Urban Development. “I am very concerned that the same players who brought us problems in the subprime area are now reconstituting themselves and bringing loans into the FHA portfolio,” he says. Gary E. Lacefield a former federal mortgage investigator who now runs Risk Mitigation Group, also sees the return to the marketplace of many lenders that were identified as culprits in the subprime fiasco. “Within the next 12 to 18 months, there is going to be FHA-insurance Armageddon,” he predicts.

Source: Business Week, Chad Terhune and Robert Berner (12/01/2008)
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