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We audited FHA-insured loan processes at two DHI Mortgage Company, LTD (DHI Mortgage) branches in Tucson and Scottsdale, Arizona, to determine whether DHI Mortgage originated, approved, and closed FHA-insured single-family loans in accordance with HUD requirements. We chose DHI Mortgage because the Scottsdale, Arizona, branch had a default rate that was double the default rate for FHA-insured loans for the state of Arizona, and then expanded our review to include the Tucson, Arizona, branch because some loans had both branch numbers on the documentation. DHI Mortgage did not follow HUD requirements for originating, approving, or closing FHA-insured loans. Our review identified the following deficiencies: 205 loans with prohibited restrictive addendums to the purchase contracts and 24 loans with significant underwriting deficiencies. In addition, we noted that DHI Mortgage’s quality control processes had weaknesses, including failure to determine that 19 loans were not eligible for FHA insurance because the loan officer had been debarred from participation in FHA-insured loan transactions. We recommend that HUD require DHI Mortgage to (1) indemnify HUD for more than $38 million for loans that did not meet FHA insurance requirements, (2) refund or buy down FHA-insured loans for over-insurance totaling $15,749, and (3) fully implement a quality control plan in compliance with FHA requirements.