Submit a Section 18 application to obtain HUD approval of any proposed new lease agreement prior to its execution, in compliance with the United States Housing Act of 1937 and 24 CFR Part 970.

Improve controls over the proper execution and recording of all declaration of trust documents.

Implement controls to ensure that it does not enter into future third-party agreements unless the Authority follows applicable requirements in Notice PIH 2017-24 (HA), the annual contributions contract, 24 CFR Part 970, and the United States Housing Act of 1937.

Implement controls to ensure that future disposition proceeds are properly accounted for and used only for planned, approved purposes.

Place the Authority onto a zero threshold review process, requiring that all draws for funds go through field office review until the Authority completes all actions needed to close recommendations 1A through 1H.

Consider and take additional action if the Authority does not complete recommendations 1A and 1B before submitting its next annual plan, including withholding further awards for its program, conditioning future grant funds, and other remedies that may be legally available until the Authority completes recommendations 1A and 1B.

Provide technical assistance to the Authority regarding the deficiencies identified with the rooftop lease and related proceeds, and Federal requirements for property disposition.

Support that $2,870,374 paid for goods and services was reasonable in accordance with applicable requirements or repay its Public Housing Operating Fund or Capital Fund programs from non-Federal funds for any amount that it cannot support or that is not considered reasonable.

Support that $1,236,210 in funds not yet spent on the contracts reviewed, along with any new procurements, would be reasonable or reallocate the funds to ensure that they will be put to their intended use

Review any ongoing time-and-materials contracts and if requirements were not followed, remedy the noncompliance or reprocure the contracts to ensure compliance with HUD requirements.

Ensure that all Authority staff members working with procurements and contract administration receive procurement training on applicable requirements, including the requirements related to cost reasonableness, contract types, the number of bids or quotations, contract provisions, and maintaining documentation to show the history of procurements.

Establish and implement adequate record-keeping procedures to comply with applicable procurement requirements, including a register of all contracts with key information and a checklist for each procurement action, to ensure that it completes required steps and receives all required documentation.

Require lenders to provide evidence of sufficient flood insurance or execute indemnification agreements for the 21 loans in our statistical sample that did not have sufficient flood insurance at the time of our audit to put nearly $1.1 million to better use. (See appendix A.)

Develop a control to detect loans that did not maintain the required flood insurance to put $1.5 billion to better use by avoiding potential future costs to the FHA insurance fund from inadequately insured properties.

Corrective Action Taken

In November 2022, FHA published the Acceptance of Private Flood Insurance for FHA-Insured Mortgages final rule (Docket No. FR-6084-F-02) in the Federal Register and issued Mortgagee Letter 2022-18, Acceptance of Private Flood Insurance for FHA-Insured Mortgages (ML 2022-18). These policy changes not only strengthened Single Family’s Mortgagee requirements regarding flood insurance, but they also introduced the ability for borrowers and Mortgagees to purchase private flood insurance. In January 2023, the sections in ML 2022-18 that pertain to HUD’s forward mortgage programs were superseded by the FHA Single Family Housing Policy Handbook (Handbook 4000.1), adding a requirement that the Mortgagee review all FHA-insured properties annually to determine if the property is located within a Special Flood Hazard Area (SFHA). For properties located within a SFHA, the Mortgagee must ensure flood insurance is in force for the life of the mortgage and that the property has sufficient flood insurance coverage. To ensure compliance with the policy requirements, the Mortgagee must include updated flood insurance information for properties where flood insurance is required in the Servicing and Claims File. In addition, Handbook 4000.1 includes flood insurance servicing policy updates. HUD submitted a revised management decision reflecting this action on June 22, 2023.

Consult with the Office of General Counsel to review the language in the statutes, regulations, and handbooks and if warranted, make adjustments to the forward mortgage handbook to ensure consistency with the statute.

Consult with the Office of General Counsel to review the language in the statutes, regulations, and handbooks and if warranted, make adjustments to the HECM handbook to ensure consistency with the statute and regulation.

Develop and implement controls for use of the bulk grant closeout process going forward to ensure that grants are closed in accordance with all applicable requirements, including that administrative actions and required work under the grant award have been completed by the grantee before the grant is closed out. These controls should include but not be limited to increased collaboration and communication between headquarters and field offices.

Develop and implement controls to ensure that future grant data reporting to stakeholders is consistent and accurate, including defining how records should be counted and data should be presented and ensuring that accurate POP dates are maintained in HUD’s systems.

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.

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.