Update and revise policies and procedures, including reinforcement of guidance (for example, mortgagee letters, notifications to servicers, or training) to ensure that servicers accurately report the status of delinquent loans to HUD.

Require indemnification for the 26 loans that had significant servicing deficiencies. In these cases, the loss to HUD was $1,673,117 (appendixes A and D).

Reinforce existing guidance (such as mortgagee letters, notifications to servicers, and training) to servicers to ensure that they engage in required loss mitigation.

Require that the servicers with significant and other deficiencies revise and update their policies and procedures, as necessary, to ensure that they comply with HUD requirements and guidance on loss mitigation evaluation.

Modify the recapture provisions of the 35 home-buyer assistance agreements totaling $488,519 to meet HUD recapture requirements relating to the sales price, closing costs, and net proceeds.

Update its procedures to ensure that any additional home-buyer assistance agreements contain recapture provisions that meet HUD recapture requirements relating to the sales price, closing costs, and net proceeds.

Train its staff to ensure that recapture amounts do not exceed net sales proceeds.

Revise and implement written policies and procedures for managing and accurately tracking all NSP3 activity to ensure that the $12,275 in identified closing cost refunds and any additional refunds identified in recommendation 2B are not overpaid by recipients.

Identify any additional closing cost refunds for NSP3 properties using the general ledger, DRGR supporting documentation, and the property file and either repay the recipients from non-Federal funds or update its tracking spreadsheet.

Repay $95 from non-Federal funds to the two recipients who paid more than the assistance provided (appendix E).

Repay the program $1,495 for closing cost expenses not incurred from non-Federal funds and remove the expenses from program records if the City incorrectly recorded the refunds as program income.

Reclassify home-buyer assistance expenses and refunds from the City’s NSP3 ARR program to its NSP3 Homebuyer Assistance Program in DRGR and the general ledger.

Consolidate and reconcile all NSP3 home-buyer assistance tracking spreadsheets and the general ledger with HUD’s DRGR to ensure that all information is accurate and up to date.

Develop and implement written policies and procedures to periodically reconcile all NSP3 tracking spreadsheets to ensure that data remain accurate and up to date.

Provide training to all employees responsible for NSP3 to ensure that the City adequately determines repayment amounts and tracks and records NSP3 activities.

Finalize and implement monitoring procedures to ensure that $6,324,625 in flat rents are appropriately charged to tenants over the next year.

Follow up with the housing authorities in our sample, identified as noncompliant with flat rent requirements, to ensure that their rents are properly adjusted.

Clarify guidance to better enhance housing authority understanding of the requirement, including explaining that housing authorities must code ceiling rent tenants as flat rents and explaining what housing authorities should do when maximum rents for low-income housing tax credit properties are lower than the minimum flat rent amounts required by HUD.

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.