The Department on Wednesday announced that its on-going efforts to curb predatory lending recently received a boost when Appraiser Watch, its risk-based appraiser monitoring system, became fully operational.

By using Appraiser Watch, the Federal Housing Administration will be better able to identify appraisers who either knowingly or unintentionally place homeowners at risk for losing their homes to foreclosure because of inflated valuations.

Rising foreclosure rates also could jeopardize the FHA mortgage insurance fund, which is used by the government to reimburse lenders when homeowners are unable to make payments on government-guaranteed mortgages.

The new system relies on historical risk factors to help identify appraisers whose work will be reviewed by FHA staff.

Included among the risk factors are an appraiser's association with mortgages with high default rates, and a high volume of appraisals on mortgage programs more likely to have high default rates, such as rehabilitation loans, loans for multi-unit and real estate-owned properties.

Appraiser Watch is the latest Department initiative to protect homebuyers from predatory lenders and practices. Others include:

• Neighborhood Watch Early Warning system is a web-based software that identifies high rates of default and claims in specific zip codes, and the lenders associated those defaults.



• Credit Watch Termination, identifies poorly performing mortgage lenders, advises marginal performers that they must improve to remain an approved lender, and terminates a lender's ability (at the branch level) from originating FHA-insured mortgages if it fails to improve. HUD may bar lenders from issuing FHA-insured mortgages if their default and claims rates on loans made within the last 24 months in a geographical area are 200 percent of the average rate for that area, and if their rate exceeds the national default and claim rate.



• HUD's latest round of housing counseling grants, which when soon awarded will provide some $2.7 million to agencies combating predatory lending.

For more information about the Department's effort to predatory lending, click on the Internet.