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Open Recommendations by Oversight Area
Oversight Area	Priority Recommendations	Open Recommendations
Housing Assistance	75	100
Community Development	3	75
Disaster Recovery	3	82
Financial Risk and Accountability	6	130
Technology and Cybersecurity	4	88
Health and Safety	1	53
HUD's Operations	4	100
Total	96	628

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We reviewed the general and application controls over the Federal Housing Administration’s (FHA) Single Family Premiums Collection Subsystem – Periodic (SFPCS-P) and Single Family Acquired Asset Management System (SAMS) as part of the internal control assessments required for the fiscal year 2016…

Oversight Area: Homeownership

The OIG has determined that the contents of this recommendation would not be appropriate for public disclosure and has therefore limited its distribution to selected officials.

We reviewed Seneca Mortgage’s servicing of Federal Housing Administration (FHA)-insured mortgages and its implementation of the U.S. Department of Housing and Urban Development’s (HUD) Loss Mitigation program. We selected Seneca Mortgage based on the results of our single-family risk assessment. …

Oversight Area: Homeownership

We recommend that the Acting Deputy Assistant Secretary for Single Family Housing instruct Seneca Mortgage to repay the $19,136 in ineligible holding costs to the FHA insurance fund.

We recommend that the Acting Deputy Assistant Secretary for Single Family Housing instruct Seneca Mortgage to ensure that reimbursement is not requested for holding costs incurred beyond the conveyance deadline related to FHA loan number 281-3493258.

We recommend that the Acting Deputy Assistant Secretary for Single Family Housing instruct Seneca Mortgage to instruct the investors or holders for FHA loan numbers 501-7067695, 501-6877136, 061-0982338, and 501-5885504 to transfer these loans to FHA-approved servicers.

We recommend that the Acting Deputy Assistant Secretary for Single Family Housing instruct Seneca Mortgage to implement procedures to ensure that FHA loans are transferred only to FHA-approved servicers regardless of investor input.

We recommend that the Acting Deputy Assistant Secretary for Single Family Housing instruct Seneca Mortgage to strengthen conveyance procedures to ensure that properties are transferred to HUD within 30 days of securing the property, thereby ensuring that ineligible costs are not paid by HUD on future loans submitted for claim.

We recommend that the Acting Deputy Assistant Secretary for Single Family Housing instruct Seneca Mortgage to strengthen program controls and procedures to ensure that servicing efforts are accurately reported in HUD systems, thereby complying with HUD’s loss mitigation requirements.

We recommend that the Acting Deputy Assistant Secretary for Single Family Housing review the part B claim paid for FHA loan number 501-7612832, determine the amount of holding costs paid after the conveyance deadline, and require the relevant servicer to repay the ineligible holding costs to the FHA insurance fund.

We recommend that the Acting Deputy Assistant Secretary for Single Family Housing instruct Seneca Mortgage officials to develop and implement program controls and procedures for FHA-insured loans being subserviced by another lender, including procedures for conducting quality control reviews of the subservicer’s actions.

In accordance with the Chief Financial Officers Act of 1990, as amended, we are required to annually audit the consolidated financial statements of the U.S. Department of Housing and Urban Development (HUD). HUD reissued its fiscal year 2016 and 2015 (Restated) consolidated financial statements due…

Evaluate the current content of HUD’s financial statement note disclosures to identify outdated or irrelevant information that may not be needed, while maintaining compliance with OMB Circular A-136 and presenting the reader with the information necessary to understand HUD’s financial statements.

Work with FHA and Ginnie Mae to reevaluate the note consolidation process to determine changes that can be made to the process to ensure compliance with financial reporting requirements.

Reassess HUD’s current consolidated financial statement and notes review process to ensure that (1) all reviewers have sufficient financial reporting experience; (2) it includes steps to verify that the notes match HUD’s financial statements, are sufficiently supported, and accurately include FHA and Ginnie Mae information; and the review can be completed within the required timeframe needed to allow for audit.

Develop a plan to ensure that restatements to HUD’s consolidated financial statements are properly reflected in all notes impacted by the restatement.

We audited the U.S. Department of Housing and Urban Development’s (HUD) oversight of Federal Housing Administration (FHA)-insured loans originated with borrower-financed downpayment assistance. The audit was initiated based on the results from three HUD, Office of Inspector General (OIG) audits,…

Oversight Area: Homeownership

Reconsider HUD’s position on questioned borrower-financed downpayment assistance programs, including an analysis of the financial impact to FHA borrowers, risk to the FHA program, and whether current statute prohibits borrower-financed downpayment assistance programs as they are currently structured.

Develop and implement policies and procedures to strengthen HUD’s comprehensive loan-level, postendorsement, and lender reviews by evaluating loans containing downpayment assistance (for example, interest rates, fees, borrower certifications, lender reviews, impact to borrower, related agreements, etc.). Policies and procedures should include evaluating the structure of downpayment assistance programs, including whether the programs’ structure and funding mechanisms comply with all HUD requirements and guidelines.

Develop specific requirements and guidance for lenders to review HFA downpayment assistance programs (for example, interest rates, fees, borrower certifications, lender reviews, impact to borrower, related agreements, etc.). Requirements and guidance should include evaluating the structure of downpayment assistance programs, including whether the programs’ structure and funding mechanisms comply with all HUD requirements and guidelines.

Require lenders to obtain a borrower certification that details their participation in an HFA downpayment assistance program, including relevant details of the specific program (for example, impact on interest rate, mortgage payments, fees, equity, acknowledgement of other less costly loan products, etc.).

Ensure that lenders enter accurate and missing downpayment assistance gift data into FHA Connection when identified by HUD.

Implement new data fields where lenders would be required to enter specific downpayment assistance information (for example, name of the source, name of assistance program, name of government entity or HFA, etc.) to allow for auditability and for HUD to generate reports and perform risk assessments.

Review fees identified in this report that were charged as part of borrower-financed downpayment assistance programs and determine whether they are reasonable or necessary. HUD should immediately notify lenders to discontinue charging any fees that are determined to be unreasonable and unnecessary.

Require any participating lender to reimburse borrowers that received an FHA loan with borrower-financed downpayment assistance for any fees that were determined to be unreasonable and unnecessary.

The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General audited the Section 8 housing assistance payments program of the New Horizons project in Kansas City, MO. Our objective was to determine whether New Horizons properly verified tenants’ eligibility, requested…

Require New Horizons to repay HUD from project funds if available (otherwise, from nonproject funds) $144,556 in housing assistance payments for tenants who were not eligible for assistance or not living in units.

Require New Horizons to provide support for the $726,399 in housing assistance payments based on missing or incomplete tenant files or repay the assistance from project funds if available (otherwise, from nonproject funds) to HUD.

Require New Horizons to support that $16,687 in tenant rents was collected and deposited as required or repay the project from nonproject funds.

Require New Horizons to obtain independent management.

Require New Horizons to conduct a review to determine who currently lives in the units and verify their eligibility.

Monitor New Horizons to ensure that it properly maintains tenant files, completes required annual recertifications, and supports disability exemptions in accordance with HUD requirements.

We audited the Stone Terrace Apartments’ Section 8 housing assistance payments program based on a citizen’s complaint alleging mismanagement of its housing assistance payments contract. The audit was part of the activities in our fiscal year 2017 annual audit plan. Our audit objective was to…

Reimburse HUD $52,932 from non-project funds for the overpayment of housing assistance and utility allowances due to incorrect calculations.

Reimburse the appropriate households $566 from non-project funds for the underpayment of housing assistance due to incorrect calculations.

Reimburse HUD $32,334 for the overpayment of housing assistance due to unreported, and underreported income, or income reported late. This reimbursement is either from non-project funds or collections from applicable households.

Support or reimburse HUD $6,444 from non-project funds for the unsupported payments of housing assistance cited in the finding.

Implement adequate quality control procedures to ensure that housing assistance payments are appropriately calculated and supported. These procedures and controls should ensure that $76,107 in program funds are appropriately used for future payments.

Document the implementation of the quality control plan and the completed reviews of the tenant certification process.

Revise its occupancy standards to include policies and procedures to prevent underuse of the project’s units.

Review and update the project’s internal transfer waiting list to include the applicants’ move-in dates, and the project’s external waiting list to include notations showing the reasons why applicants were not admitted into the project’s program and why applicants were bypassed.

Develop and implement adequate procedures and controls to ensure that the project complies with HUD’s requirements and its own policies regarding the management of its waiting list.

We conducted an audit of BLM Companies LLC’s controls and performance under its Management and Marketing III program field service manager contract with the U.S. Department of Housing and Urban Development (HUD) for area 1D. Area 1D included HUD real estate-owned and custodial properties in New…

Oversight Area: Homeownership

We recommend that the Associate Deputy Assistant Secretary for Single Family Housing require BLM to certify and provide supporting documentation that the identified deficiencies have been corrected for the 57 properties cited in this audit report.

We recommend that the Associate Deputy Assistant Secretary for Single Family Housing require BLM to repay $8,034 in ineligible monthly management and inspection fees for 57 sample properties with health and safety hazards or significant not-ready-to-show conditions.

We recommend that the Associate Deputy Assistant Secretary for Single Family Housing require BLM to support or repay $488,883 in unearned property management and inspection fees for 1,028 properties with three or more consecutive unresolved discrepancies in its routine exceptions reports.

We recommend that the Associate Deputy Assistant Secretary for Single Family Housing require BLM to implement an effective quality control system, including specifying how many quality control field inspections it will perform, how it will select properties for review and inspection, reviewing exception reports by case number, completing the routine inspection form during field inspections, documenting quality control findings and how it resolved them, and retaining records that allow it to identify and correct patterns of deficiencies and poor performance. This would put an estimated $891,000 to better use in the next 12 months.

We recommend that the Associate Deputy Assistant Secretary for Single Family Housing require BLM to evaluate the structure of its exception reports to ensure that they do not omit existing hazards and other issues reported by inspectors.

We recommend that the Associate Deputy Assistant Secretary for Single Family Housing require BLM to perform required background investigations before allowing individuals and vendors to work under the contract, and prevent those who have not had background checks from performing further work under the contract until it determines that they are suitable for the duties assigned.

We recommend that the Associate Deputy Assistant Secretary for Single Family Housing require BLM to sign its contracts with vendors.

We recommend that HUD’s Associate Deputy Assistant Secretary for Single Family Housing assess BLM’s performance under the area 1D contract at least quarterly to determine whether it has improved its performance. If its performance does not improve, coordinate with the Office of the Chief Procurement Officer to determine whether BLM was in default of its contract and take appropriate action.

We audited the U.S. Department of Housing and Urban Development’s (HUD) Community Development Block Grant program’s direct home-ownership assistance activities. We conducted the audit because it was included in our audit plan based on recent HUD, Office of Inspector General, audits that found…

Oversight Area: Community Improvement

Direct responsible field offices to require the grantees identified by the audit to either provide documentation to support $227,260 in unsupported payments or reimburse their programs from non-Federal funds for costs they cannot support.

Provide guidance to field office staff to clarify the statutory requirements in 42 U.S.C. 5305(a)(24) regarding a principal reduction and a downpayment for direct home-ownership assistance activities.

Develop and implement guidance to communicate appropriate ways for grantees to calculate household income.

Reemphasize to field offices the importance of using the correct monitoring guide to monitor direct home-ownership assistance activities.

We audited the City of New Orleans’ HOME Investment Partnerships program in response to a citizen complaint alleging that the City did not monitor its HOME-assisted projects and in accordance with our annual audit plan. Our objective was to determine the validity of the complaint allegations and…

Oversight Area: Community Improvement

We recommend that the Director of HUD’s New Orleans Office of Community Planning and Development require the City to develop and implement a HUD-approved written plan and procedures and take actions that will correct and prevent the deficiencies noted in the finding, improve program administration effectiveness, strengthen the control environment, ensure compliance with HUD regulations and its own policies and procedures, and ensure that it has the continuing capacity to carry out its HOME program activities as required. Implementing this recommendation should ensure that the $9,339,983 in HOME funding available to the City is better used.

We recommend that the Director of HUD’s New Orleans Office of Community Planning and Development require the City to repay its program from non-Federal funds $1,829,837 for the four projects that were sold and failed to meet the affordability requirements.

We recommend that the Director of HUD’s New Orleans Office of Community Planning and Development require the City to support that rents were within the rent guidelines or repay tenants and/or HUD from non-Federal funds for rent overpayments of $82,800 at Rosa Keller.

We recommend that the Director of HUD’s New Orleans Office of Community Planning and Development require the City to support that all HOME-assisted units at the Greater Treme Consortium, Inc.-Robertson Street, Greater Treme Consortium, Inc.-Dumaine Street, Iberville Project Phase II-Bienville Basin, OIC1-N. Dorgenois Street, OIC2-Painters Street, OIC5-Pauger Street, Treme Cottages, Robert Wolfe Construction-HOME Rental Project, and Rosa Keller projects meet HUD housing property standards or repay its program from non-Federal funds $5,718,095 disbursed in contract costs.

We recommend that the Director of HUD’s New Orleans Office of Community Planning and Development require the City to establish and implement procedures for identifying and resolving property ownership transfers by the HOME organizations and projects and to ensure ongoing compliance with program requirements by project owners.

We recommend that the Director of HUD’s New Orleans Office of Community Planning and Development require the City to establish and implement procedures to ensure that project owners submit required project compliance reports and rents are provided annually to the project owners and that it maintains documentation showing compliance.

We recommend that the Director of HUD’s New Orleans Office of Community Planning and Development require the City to establish and implement procedures for ensuring that it performs initial income eligibility determinations, has supervisory review of determinations, and maintains adequate supporting documentation.

We recommend that the Director of HUD’s New Orleans Office of Community Planning and Development require the City to develop and implement adequate written procedures and management controls to ensure that it conducts property inspections and onsite monitoring as required, including but not limited to establishing protocols for collecting and maintaining adequate documentation.

We recommend that the Director of HUD’s New Orleans Office of Community Planning and Development require the City to update the IDIS PR-47 HOME Vacant Units Report to include accurate and current data and continue this practice periodically.

We recommend that the Director of HUD’s New Orleans Office of Community Planning and Development require the City to implement adequate procedures and controls to ensure the timely reporting of program income and that it appropriately spends program income.

We recommend that the Director of HUD’s New Orleans Office of Community Planning and Development require the City to develop tools to improve record-keeping practices and maintain appropriate databases to track data related to property inspections, onsite monitoring, unit vacancies, HOME program participants, available units, tenant-based rental assistance units, and rents.

We audited the U.S. Department of Housing and Urban Development’s (HUD) resident home-ownership program grant for Lakeview East Cooperative (project) based on the results of a risk assessment of multifamily housing programs in Region 5’s jurisdiction (States of Illinois, Indiana, Michigan,…

Implement adequate procedures and controls to ensure that memberships are sold at or below the fair market value and HUD’s secured interest in the memberships is appropriately valued.

Have a representative of HUD at the closing for membership sales to sign the HUD notes.

Develop and maintain a waiting list for rental units that meets the requirements of the resident home-ownership plan and considers the tenant profile.

Implement adequate procedures and controls to ensure that any rental units vacated by current households or units associated with memberships which were repurchased by the Cooperative and then remained vacant more than 6 months, are rented to very low-, low-, or moderate-income households selected from a waiting list for rental units that meets the requirements of the resident homeownership plan and considers the tenant profile.

For the two units for which the Cooperative acquired the memberships associated with the units from members and which had been vacant for more than 6 months, rent the units to households that meet the tenant income profile.

Provide sufficient documentation to support that HUD had received 50 percent of the proceeds from initial membership sales as of May 2017. If the Cooperative cannot do this, it should pay HUD half of the principal on the promissory notes payable to the Cooperative for all of the membership sales less the amount the Cooperative can support that it paid HUD for initial membership sales.

Implement adequate procedures and controls to ensure that HUD receives its full share of the proceeds from future initial membership sales.

Provide sufficient documentation to support that the Cooperative used its share of the proceeds from initial membership sales in accordance with the grant agreement. If the Cooperative cannot do this, it should transfer funds from its operating account, in an amount equal to half of the principal on the mortgages to the Cooperative for all membership sales less the amount the Cooperative can support that it used for eligible purposes, to a reserve account to be used in accordance with the grant agreement.

Implement adequate procedures and controls to ensure that its share of the proceeds from initial membership sales is used in accordance with the grant agreement.

Implement adequate procedures and controls to ensure that the Cooperative receives HUD approval before using the $148,872 in proceeds from initial membership sales offset by undisbursed funds which was in the Cooperative’s reserve for replacements account for the project.

Sign the amendment to the use agreement which would require the Cooperative to ensure that monthly housing expenses did not exceed 35 percent of the members’ monthly adjusted gross income only at the time of sale. If the Cooperative does not sign the amendment, it should verify the current household income for all members to determine whether the members are paying more than 35 percent of their households’ monthly adjusted gross income for monthly housing expenses. For any members that are paying more than 35 percent of their households’ monthly adjusted gross income for monthly housing expenses, it should determine the amount the household overpaid and reimburse the household that amount. It should also implement adequate procedures and controls to ensure that members do not pay more than 35 percent of their households’ monthly adjusted gross income for monthly housing expenses.

Implement adequate procedures and controls to ensure that it sells memberships to the same proportion of very low-, low-, and moderate-income households as stated in the resident income profile in paragraph 4.a. and required by paragraph 10.b. of the use agreement.

Require the member for whom it tried to transfer the membership associated with a unit in which the remaining member passed away, to move into the unit or continue to pursue the release of the member’s membership rights to the Cooperative.

Require the members who did not maintain their unit at the project as their principal residence to move into the unit or continue to pursue the sale of their membership in the Cooperative.

Provide sufficient documentation to support that the single occupant of a unit was a member of the Cooperative. If the Cooperative cannot do this, it should determine who has the right to membership associated with the unit, transfer the membership to that person if appropriate, and require him or her to move into or sell the unit.

Implement adequate procedures and controls to ensure that members maintain their units at the project as their principal residence or sell their memberships.

Rent the unit that was used to provide rent-free housing to former employees of the management agent to a very low-, low-, or moderate-income household selected from a waiting list for rental units that meets the requirements of the resident home-ownership plan and considers the tenant profile.

Implement adequate procedures and controls to ensure that the project’s units are used for rental or cooperative housing unless otherwise approved by HUD.

Implement adequate procedures and controls to ensure that it submits the required reports to HUD to show continued compliance with the program.

Ensure that the Cooperative’s board members and responsible staff of the Cooperative’s management agent are provided training on HUD’s requirements and the grant agreement.

Consider removing from the Cooperative’s board the member who did not maintain their unit as their principal residence.

Make a preliminary determination as to whether the Cooperative is in default of the grant agreement. If it is preliminarily determined that the Cooperative is in default, HUD should provide the Cooperative notice of the determination and propose corrective or remedial actions to address the default and prevent the Cooperative from repaying the remaining $18,149,023, which HUD disbursed for the project ($18,607,467 in funds disbursed for the project – $458,444 in proceeds from initial membership sales the Cooperative remitted to HUD).

Open Recommendations by Oversight Area

Oversight Area

Status

Priority

Review of Information Systems Controls Over FHA’s Single Family Premiums Collection Subsystem – Periodic and the Single Family Acquired Asset Management System

Seneca Mortgage Servicing LLC, Elma, NY, Generally Complied With HUD’s Loss Mitigation Program Requirements for Servicing Its Portfolio of FHA-Insured Mortgages

HUD’s Fiscal Years 2016 and 2015 (Restated) Consolidated Financial Statements Audit (Reissued)

HUD Failed To Adequately Oversee FHA-Insured Loans With Borrower-Financed Downpayment Assistance

New Horizons, Kansas City, MO, Received Improper Section 8 Housing Assistance Payments

Stone Terrace Apartments, Chicago, IL, Did Not Always Comply With HUD’s Requirements Regarding the Administration of Its Section 8 Housing Assistance Payments Program

BLM Companies LLC Failed To Ensure That It Protected and Preserved HUD Properties Under Its Field Service Manager Contract for Area 1D

HUD Can Improve Its Oversight of Community Development Block Grant Direct Home-Ownership Assistance Activities

The City of New Orleans, New Orleans, LA, Did Not Always Properly Administer Its HOME Program

The Cooperative and Management Agent Lacked Adequate Controls Over the Operation of Lakeview East Cooperative, Chicago, IL

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