Citizens Against Government Waste (CAGW) has reproved the US Department of Housing and Urban Developmentā€™s (HUD) Federal Housing Administration (FHA) for recklessly issuing mortgage insurance to thousands of ineligible borrowers.

According to a May 2012 Government Accountability Office (GAO) report, FHA had insured over $1.44bn in mortgages for 6,327 borrowers with an average of $20,340 in tax debt.

Under the review of eight cases of borrowers, GAO found that five had not reached repayment agreements with the IRS, and have not been eligible for the mortgage insurance they received.

The governing body also said that thousands of borrowers who received insurance from FHA as part of 2009 American Recovery and Reinvestment Act (stimulus) were ineligible to do so.

Borrowers with tax debt carry foreclosure risk "two to three times" greater than those without unpaid taxes, applicants for FHA mortgage insurance are not required to provide their federal debt status to FHA.

CAGW president Tom Schatz said, "The predictable result is that thousands of ineligible borrowers received mortgage insurance paid for by taxpayers that have played by the rules."

"This report confirms two points that CAGW has been making for years: that the 2009 stimulus bill was an egregious waste of $800 billion in taxpayer money, and that the federal government does no favors to taxpayers or the economy by meddling in housing finance."

Citizens Against Government Waste is a nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, mismanagement and abuse in government.