The Department of Housing and Urban Development (HUD) started a review of several Federal Housing Administration (FHA) mortgage servicers during the summer, discovering what it calls "significant differences" in the way they handle defaulted borrowers in the loss mitigation process.

"We have found that some servicers do it better than others" and that raised concerns at the agency, housing commissioner David Stevens told National Mortgage News (NMN).

The FHA expects to announce the results of these reviews in a few weeks. As reported by NMN on Tuesday, the agency is expanding its review of servicers, "to make sure they are in compliance with what is expected of FHA servicers," Stevens said.

FHA regulations require servicers to offer delinquent borrowers several options on their troubled loans, including repayment plans, modifications, and then foreclosure.

"There is no excuse for not using all processes that are available" to help families in distress, Stevens said. "That is not acceptable to us."

HUD can assess treble damages on servicers for failing to comply with FHA loss mitigation requirements.

This means HUD could impose a $300,000 fine if a $100,000 loan goes into foreclosure under a law Congress passed in the early 1990s.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.