Washington Free Beacon
USDA program’s mismanagement led to nine-figure losses, IG report says
A federal program that guarantees home loans to rural borrowers has seen taxpayer losses and foreclosure rates skyrocket, problems federal watchdogs attribute to bureaucratic mismanagement but others say are more fundamental.
President Barack Obama used $10.5 billion in stimulus funds in 2009 to increase federal spending on the U.S. Department of Agriculture’s (USDA) Single Family Housing Guaranteed Loan Program.
USDA spent $27.8 billion on the program, which reimburses private lenders for up to 90 percent of the cost of default for loans made to low- and moderate-income borrowers in rural areas, in the four fiscal years ending in 2011.
The department’s loss claims—its reimbursements for loans in default—increased dramatically in recent years, according to a recent report from USDA’s inspector general. The program paid $103 million in loss claims in fiscal year 2008; that figure had nearly tripled, to $295 million, by fiscal year 2011.
The number of guaranteed loans increased by 131 percent from FY 2008 to FY 2011, while the number of foreclosures increased by 458 percent.
The IG in part blames bureaucratic mismanagement, noting that USDA did not put in place measures to ensure that borrowers were actually eligible for the program and did not undertake required steps to minimize taxpayer losses.