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The Department of Housing and Urban Development’s lack of oversight into borrower-financed down payment assistance programs for Federal Housing Administration-insured loans puts borrowers and the FHA’s flagship insurance fund at “unnecessary risk,” HUD’s watchdog said in a new report.

According to the report from the Office of Inspector General for the U.S. Department of Housing and Urban Development, HUD “failed to adequately oversee” billions of dollars in loans that may have “questionable down payment assistance,” thereby putting the FHA’s Mutual Mortgage Insurance Fund at risk because of borrowers with higher than market interest rates.

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