We audited the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration, Home Affordable Modification Program’s (FHA-HAMP) policies for reporting nonincentivized loan modifications and filing partial claims.  The audit was a result of a prior Office of Inspector General (OIG) external review in which we identified delays in reporting FHA-HAMP nonincentivized loan modifications and filing partial claims.  This audit was also part of our annual audit plan.  The objective of the audit was to determine whether there was a need for HUD to issue a policy requiring servicers to report FHA-HAMP nonincentivized loan modifications and file FHA-HAMP nonincentivized partial claims within specific timeframes.

HUD’s FHA-HAMP loss mitigation policy did not include deadlines to ensure timely reporting for nonincentivized loan modifications and filing of nonincentivized partial claims.  Therefore, the servicers were not obligated to always report or report in a timely manner nonincentivized loan modifications and file or file in a timely manner nonincentivized partial claims in FHA Connection (FHAC).  This condition occurred because HUD was aware of these issues but have yet to establish a policy for reporting the terms of nonincentivized loan modifications and filing the nonincentivized partial claims within specified timeframes or deadlines to address them.  As a result, mortgage data from HUD’s systems may not have accurately reflected the status of the FHA-insured mortgages for monitoring and financial reporting of the Mutual Mortgage Insurance Fund (MMIF).  In addition, our recent corrective action verification review showed that HUD’s Claims Subsystem programming did not always properly calculate the time between claims to suspend payment for claims that had a reported prior loss mitigation action within 24 months because the claims were not submitted in order.  

We recommend that the Deputy Assistant Secretary for Single Family Housing to (1) update HUD’s loss mitigation policies, to include deadlines for the servicers to file the FHA-HAMP nonincentivized partial claims, and consider imposing sanctions for noncompliance with these deadline requirements and (2) update HUD’s loss mitigation policies, to include deadlines for the servicers to report the new terms of the FHA-HAMP nonincentivized loan modifications, and consider imposing sanctions for noncompliance with these deadline requirements.