A report by USDA's Office of the Inspector General concludes that the department may have written more than $4 billion in housing loans to ineligible borrowers. The preliminary IG report says that a sample of 100 loans it audited out of 81,000 showed that almost a third were given to ineligible borrowers, including some with income that exceeded the program limits, others who already owned homes and borrowers who purchased homes with swimming pools. The loans were paid for by 2009 economic stimulus legislation.
Based on the sample results, the report estimates that 27,206 loans worth about $4 billion –– or more than a third of those granted –– could have been made to ineligible borrowers.
The stimulus included more than $10 billion for the program, which guarantees single family housing loans in rural areas. It reduces lenders' risk by reimbursing up to 90 percent of the outstanding principal and interest if a borrower defaults.
USDA rural development officials disagreed with parts of the inspector general's report, saying they believed only 10 of the 100 sampled loans went to ineligible borrowers. USDA Under Secretary Dallas Tonsager said in a statement to the auditors that several steps have already been taken to improve the loan distributions, including beefing up training. The report said many loan officers were unaware of specific requirements for loan eligibility.
