The National Housing Bank (NHB) is holding surprise inspections of mortgage financiers to ensure their proper functioning after the recent discovery of fraud at Aviom Housing Finance, said two officials familiar with the matter. These investigations are in addition to two annual credit reviews NHB usually performs of mortgage financiers.
Officers at the quasi-housing finance regulator are currently focusing on how refinancing funds are being used to ensure their proper allocation, the officials said. They are also verifying whether housing finance companies (HFCs) are accurately reporting data on bad loans and validating the authenticity of their investment portfolios.
“NHB’s primary goal with these surprise inspections is to ensure that housing finance companies are making proper disclosures on their affordable housing portfolios, accurately reporting eligible borrowers for refinancing, and providing correct data on bad loans, investment portfolios, and insurance income,” one of the officials said.
NHB’s move to tighten regulations tracks the discovery of fraud at Aviom. Late last year, Aviom informed lenders of potential delays in payments following the discovery of fraudulent transactions in its financial records. Aviom also said that NHB had initiated a third-party forensic audit after an on-site inspection uncovered signs of manipulated mutual fund account statements.
People in the know said NHB officers are specifically checking whether data submitted by HFCs on eligible borrowers for subsidies under economically weaker section and low-income group schemes is accurate, and whether all accounts are eligible for the refinance programme.
ET previously reported that NHB had instructed HFCs to report bad loan data on the first day of each month after discovering that some mortgage lenders were collecting loans from the previous month into the following month. This practice was reportedly aimed at keeping bad loan ratios low and preventing negative reports to NHB.
Earlier, HFCs tended to submit key financial data to NHB by the 10th or 12th of each month, raising concerns among regulators.
Another ET report revealed that NHB had reprimanded home financiers for misselling insurance policies bundled with housing loans. The regulator instructed these companies to stop bundling insurance products without adequately informing borrowers of the terms and conditions of such policies.
In two separate communications – dated March 12, 2025, and December 10, 2024 – NHB directed HFCs to obtain explicit customer consent and offer insurance options from at least two providers, ensuring greater transparency and competitive pricing. This directive follows a warning issued to HFC CEOs in January, where NHB expressed concern over the increasing share of insurance income in the net interest income of these companies.
Source Homevior.in
