HUD Did Not Conduct Rulemaking or Develop Formal Procedures for Its Single- Family Note Sales Program

The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General audited HUD’s rulemaking process for its single family note sales program. We initiated the audit due to the large amount of Federal Housing Administration claims paid on note sales and because our office has never audited the single-family note sales program.  Also, there are public concerns over the creation and administration of the note sales program.  HUD did not conduct rulemaking or develop formal procedures for its single-family note sales program.  HUD did issue an advance notice of proposed rulemaking in 2006 to solicit comments on its note sales program.  However, it did not finalize the comment process or prepare the program for a final rule.  Additionally, HUD did not develop formal guidance or procedures for its note sales program.  We recommend that the Acting Deputy Assistant Secretary of Finance and Budget and (1) complete the rulemaking process for its single-family note sales program and (2) develop and implement formal procedures and guidance for the note sales program.