The U.S. Department of Housing and Urban Development (HUD) Office of Inspector General reviewed 23 Federal Housing Administration (FHA) loans underwritten by Peoples Bank of Overland Park , Kansas . Our audit objectives were to determine whether Peoples Bank followed HUD requirements for (1) borrower eligibility and creditworthiness and property eligibility when underwriting loans and (2) implementing a quality control program. We concluded that Peoples Bank did not follow HUD's requirements when underwriting nine FHA loans. In addition, its quality control program did not comply with HUD's requirements.
We recommended that HUD require Peoples Bank to indemnify HUD for eight actively insured loans and reimburse HUD for one loan for which HUD incurred losses when it sold the property. We also recommended that HUD verify that Peoples Bank has implemented an adequate supervisory structure and adequately trained its underwriters regarding HUD requirements for FHA loans. Further, we recommended that HUD ensure that Peoples Bank implements a quality control program that meets HUD requirements.