HUD Did Not Always Provide Adequate Oversight of Its Section 203(k) Rehabilitation Loan Mortgage Insurance Program

Date Issued

Friday, July 31, 2015

Submitting OIG

Department of Housing and Urban Development OIG

Agencies Reviewed/Investigated

Department of Housing and Urban Development

Report Number

2015-CH-0001

Report Type

Audit

Agency Wide

Yes

Number of Recommendations

Questioned Costs

Funds for Better Use

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Yes

Open Recommendations

This report has 5 open recommendations.

Recommendation Number	Significant Recommendation	Recommended Questioned Costs	Recommended Funds for Better Use
2015-CH-0001-001-A	No	$792,837	$0
We recommend that HUD's Deputy Assistant Secretary for Single Family Housing require the lenders to support that the repairs to the properties associated with the 32 loans without evidence of permits complied with local code or reimburse HUD $792,837 for the escrow repair funds.
2015-CH-0001-001-B	No	$305,395	$0
We recommend that HUD's Deputy Assistant Secretary for Single Family Housing require the lenders to support that the repairs to the properties associated with the six loans were not structural repairs or indemnify HUD for the four active loans with a total estimated loss of $222,073 and reimburse HUD for the actual loss of $83,322 incurred on the sale of two properties associated with FHA case numbers 052-4308836 and 034-8239100.
2015-CH-0001-001-C	No	$83,715	$0
We recommend that HUD's Deputy Assistant Secretary for Single Family Housing require the lenders to support that the borrower for FHA case number 451-1165810 was not reimbursed for the cost of labor or indemnify the loan with an estimated loss amount of $83,715, based on the loss severity rate of 50 percent of the unpaid principal balance of $167,429 as of January 29, 2015.
2015-CH-0001-001-D	No	$39,367	$0
Support that the repair conditions and comments indicated in the direct endorsement underwriter form, form HUD-54114, were satisfied for FHA case number 501-8198149. If the repair conditions and comments were not properly addressed, the lenders should indemnify the loan with an estimated loss amount of $39,367, based on the loss severity rate of 50 percent of the unpaid principal balance of $78,733 as of January 29, 2015.
2015-CH-0001-002-C	No	$0	$0
Determine the number of 203(k) loans impacted by the incorrect loan-to-value ratio for mortgage insurance premium calculations and when applicable, reimburse borrowers or apply the overpaid premiums as credits toward borrowers' future premium payments.