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The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General, reviewed 23 Federal Housing Administration (FHA) loans originated by CTX Mortgage's Overland Park, Kansas, branch office. Our audit objectives were to determine whether CTX Mortgage followed U.S. Department of Housing and Urban Development (HUD) requirements for (1) borrower eligibility and creditworthiness and property eligibility when underwriting loans and (2) developing a written quality control plan. We concluded that CTX Mortgage did not follow HUD's requirements when underwriting 12 FHA loans. In addition, CTX Mortgage's written quality control plan did not contain all of HUD's required elements.

We recommended that the Assistant Secretary for Housing - Federal Housing Commissioner require CTX Mortgage to indemnify HUD for 12 loans with unpaid principal balances totaling more than $1.2 million. Further, we recommended that HUD ensure that CTX Mortgage revises its quality control plan to fully comply with HUD's requirements.