The federal government said it was investigating 22 mortgage providers after a national housing group accused them of engaging in unfair lending practices toward borrowers with poor credit scores.
The National Community Reinvestment Coalition said Wednesday that the lenders had implemented policies that require borrowers to have scores higher than the minimum established for certain loans insured by the Federal Housing Administration. The U.S. Department of Housing and Urban Development, which oversees the FHA, said it would investigate the allegations.
"FHA is an important vehicle for Americans who want to purchase or refinance a home," said John Trasvina, an assistant secretary with the housing department. "For lenders to deny responsible home seekers this source of credit, without regard for their capacity to repay the loans, would raise serious fair-housing concerns and, if proven, undermine our nation's recovery efforts."
FHA-backed loans have become a major source of funding for home purchases since the private market for mortgages dried up during the housing bust and credit crunch. In Southern California, for instance, government-insured FHA loans accounted for 35.8% of all mortgages used to purchase homes in October, according to San Diego research firm MDA DataQuick.