We audited Infinity Home Mortgage Company, Inc. (Infinity Home Mortgage), a nonsupervised lender approved to originate Federal Housing Administration (FHA) single-family mortgage loans. We selected Infinity Home Mortgage because its default rate for the State of Pennsylvania was significantly higher than the average default rate for the State. Our objective was to determine whether Infinity Home Mortgage complied with U.S. Department of Housing and Urban Development (HUD) regulations, procedures, and instructions in the origination and quality control review of FHA loans.
Infinity Home Mortgage generally complied with HUD requirements, procedures, and instructions in the origination of FHA loans. However, it did not implement a quality control plan in accordance with HUD requirements. It did not review all loans that defaulted within the first six payments as required by HUD. It also did not follow HUD requirements related to the minimum percentage, frequency, and timeliness of quality control reviews. In addition, Infinity Home Mortgage was not able to support all of the quality control reviews that it stated it performed. These conditions occurred because Infinity Home Mortgage disregarded HUD requirements and did not adequately implement its quality control plan. Consequently, the effectiveness of the plan, which was designed to ensure accuracy, validity, and completeness in its loan underwriting process, was lessened.
We recommend that HUD’s Deputy Assistant Secretary for Single Family Housing direct Infinity Home Mortgage to implement its quality control functions as required and follow up in 6 months to ensure the lender’s compliance.