By BOB TEDESCHI
THE subprime mortgage crisis has had at least one positive outcome: many unscrupulous professionals who steered unsophisticated borrowers into risky loans went out of business.
Some of those people have since returned to the industry, lenders and mortgage brokers say, only this time they are involved in loans insured by the Federal Housing Administration, which are also often sought by less sophisticated borrowers.
Now the F.H.A. is tightening its review of mortgage professionals who are permitted to originate its loans. Some longtime F.H.A. mortgage brokers say the efforts will help spare borrowers some of the abuses of the subprime era.
Among other things, brokers who help originate F.H.A. mortgages will be required to obtain approval in advance from the federal Department of Housing and Urban Development, of which F.H.A. is a division. In the past, nonapproved brokers could refer applicants to approved lenders and charge the borrower a fee.
Additionally, people convicted of making fraudulent loans cannot take part in the F.H.A. program. Previously, though companies were penalized by the F.H.A. for such behavior, the individuals responsible could simply switch employers.
William Apgar, the senior adviser to the secretary for mortgage finance at HUD, said that some of these individuals were probably among the roughly 1,500 new mortgage professionals who have obtained licenses to make F.H.A. loans in the last two years. (There are 13,500 in all, according to Mr. Apgar.)
“These folks know how to scam people,” he said, “and they’re now trying to scam people in a new way. But these guys haven’t just invaded F.H.A. They’re in every corner of the world.”
The new requirements for F.H.A. lenders, as well as more than $400 million in additional financing, partly for mortgage-fraud investigations, Mr. Apgar said, will help mitigate fraud among F.H.A. lenders.
F.H.A. loans are similar to subprime loans, because they are typically made to borrowers who have difficulty qualifying for prime loans — people with less money for down payments and those with damaged credit.
A frequent choice for first-time home buyers, F.H.A. loans carry competitive interest rates — late last week, for instance, the rate on a 30-year fixed-rate loan was 5.5 percent — but borrowers must pay a monthly insurance premium. (On a $400,000 loan, the insurance is $183 a month.)
Borrowers with low credit scores or low cash reserves rarely considered F.H.A. loans over the past decade, partly because of the insurance fees, but also because they could easily get other subprime mortgages with no or low down payments and with interest rates initially much lower than for F.H.A. mortgages.
The problem was that many of those loans were adjustable-rate mortgages, or ARMs, whose interest rates often spiked in the first few years. Now that these “exploding ARMs,” as they were known, have vanished, subprime borrowers are again flocking to F.H.A. loans.
Of the mortgages made in the past 12 months, about 20 percent have been F.H.A. loans, compared with about 2 percent in 2006, according to HUD.
Richard L. Tracy Jr., a board member of the Connecticut Society of Mortgage Brokers and an F.H.A.-approved lender, said the agency’s recent measures “will go a long way toward getting out the marginal players.”
Still, Mr. Tracy said, borrowers who seek F.H.A. mortgages should ask lenders how long they have been approved to offer such loans. “And they should go to the Web site of their state banking departments to verify the lenders’ licenses,” he said.
The federal government, he added, also maintains two online lists of lenders who can no longer participate in the F.H.A. program. The “Limited Denial of Participation and Debarments” lists are available on HUD’s Web site, at http://www.hud.gov/offices/hsg/sfh/lender/ldp_abou.cfm.
Mr. Apgar of the F.H.A. said prospective borrowers might also try “Neighborhood Watch,” a another Web site set up by HUD that, among other things, lists sanctions and other enforcement actions taken against lenders. That address is https://entp.hud.gov/sfnw/public/.
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