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FHA Cries for Help

The Federal Housing Administration is seeking help from outside contractors to enhance its ability to identify questionable loans.

NEW YORK (

TheStreet

) -- The Federal Housing Administration now admits it lacks the expertise and systems to use its own vast collection of data to "efficiently identify loans that have the potential to result in delinquency, default and/or foreclosure," according to a published report.

The

American Banker

said Friday the FHA is soliciting proposals from contractors to enhance the agency's systems and help it get a better understanding of how effective lenders that fund mortgages insured by the agency are in underwriting and loan servicing.

The agency was quoted as admitting it was not making "extensive use of business intelligence tools to manage and aggregate data."

The FHA's request for proposal is expected to result in a multi-year contract worth roughly $32 million.

The FHA has taken several steps this year to reduce delinquencies, including raising the up-front

mortgage insurance premium

paid by borrowers to 2.25%, and increasing down payment requirements for some borrowers.

According to its most recently published Portfolio Analysis, 9.17% of FHA-insured mortgages were delinquent as of Feb. 28. With the FHA's Mutual Mortgage Insurance Fund's capital ratio dropping below the 2% minimum required by law to 0.53%, Congress passed a bill on June 10 allowing the agency to increase its annual insurance premiums -- paid in addition to up-front premiums -- to a maximum of 1.55%. The previous annual insurance premium limit was 0.55%.

According to

MortgageDataWeb

,

Wells Fargo Mortgage

, a subsidiary of

Wells Fargo

(WFC) - Get Report

, was the top FHA lender during 2009, funding $27.1 billion in mortgages insured by the agency, followed by

TST Recommends

Bank of America Mortgage

(held by

Bank of America

(BAC) - Get Report

) with $22.1 billion,

Metlife Bank NA

(held by

MetLife

(MET) - Get Report

) with $9.5 billion,

Countrywide Bank, FSB

(part of Bank of America) with $8.8 billion and

Flagstar Bank, FSB

-- the main subsidiary of

Flagstar Bancorp

(FBC) - Get Report

-- with $8.1 billion.

With the help of the Justice Department, several other federal departments and state attorneys general, the agency is also pursuing a very large number of mortgage fraud cases. On Thursday it announced that more than 400 people have been charged as part of Operation "Malicious Mortgage."

--

Written by Philip van Doorn in Jupiter, Fla.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.