HUD Co-insured Loans
Housing legislation enacted in 1974 authorized HUD to co-insure mortgages with approved co-insuring lenders. The objective of the coinsurance programs was to facilitate the efficient processing of mortgage applications. Under the programs, the co-insuring lenders agreed to abide by HUD’s requirements, to perform HUD’s normal loan underwriting functions, and to share a portion of risk of loss. Many project owners’ co-insuring lenders were unable to honor their financial obligations, however, causing HUD to sustain large losses. As a result, HUD terminated its coinsurance programs in 1990.
Although co-insured mortgages are no longer made, HUD continues to service coinsured mortgages underwritten prior to November 12, 1990, and mortgages to project owners whose applications were in process but had not been approved as of that date. Subsequently, multifamily housing mortgages are underwritten by HUD staff with limited use of delegated processing to private sector mortgage companies.
