Threat Of Triple Damages Over Possible False Claims Leaving Banksters Gun-Shy Over Submitting FHA Insurance Claims On Robosigner-Obtained F'closures?

The Wall Street Journal reports:

• Today’s WSJ looks at how the Federal Housing Administration is facing steeper than projected losses that threaten to wipe out the agency’s reserves if home prices decline. Despite the potential for much bigger losses, the FHA actually saw its cash on hand go up in the last year. Taxpayers can thank the robo-signing crisis for that.



• The FHA doesn’t actually make loans, but instead it insures lenders against losses on loans that meet its standards. The agency functions like an insurance company: It charges premiums to borrowers who take out FHA-backed loans, and holds those premiums in reserve to pay out against claims in the future.



• Today’s report focuses on the FHA’s expected reserves after it subtracts all anticipated losses. Right now, that leaves the FHA with a razor-thin $2.6 billion in capital to pay for losses that aren’t baked into the current forecast. This is down from $4.7 billion last year and $3.6 billion in 2009.



• But the FHA’s cash on hand increased by around $800 million to $33.7 billion. While banks are completing foreclosures on FHA-backed loans, they aren’t yet filing claims to be reimbursed because of the “robo-signing” and other dubious back-office practices that surfaced last year.



• Banks that submit claims to the FHA for improperly handled mortgages can be liable under the False Claims Act to pay treble damages—or fines that are triple the amount of the claim the lender is submitting to the government.



• Banks have been holding off on submitting claims, it seems, until they’ve double- and triple-checked their processes to ensure that their reimbursement requests to Uncle Sam are iron proof.

For the story, see More on the FHA: Robo-Signing’s Effect.