Support that lead-based paint hazard control activities were necessary at 19 assisted units or reimburse its Program $70,266 from non-Federal funds for the unsupported lead-based paint hazard control activities completed at these assisted units

Coordinate with HUD’s Office of Lead Hazard Control and Healthy Homes to determine whether $51,930 in healthy homes supplemental funds used for four units in excess of $5,000 per unit was for eligible activities. If the activities are deemed ineligible, the Department should reimburse its Program the appropriate amount from non-Federal funds.

Support that one household residing in an assisted unit was income eligible or reimburse its Program $19,500 from non-Federal funds for the lead-based paint hazard control activities completed in the assisted unit.

Implement adequate procedures and controls to ensure that (1) documentation is maintained to support that contracted services are cost reasonable, (2) landlords give preference in renting assisted vacant units to families with children under 6 years of age, (3) lead inspection documentation properly supports lead-based paint hazard control activities, (4) HUD approval is obtained when more than $5,000 per unit in healthy homes supplemental funds is budgeted to assist units, and (5) its staff is fully knowledgeable of the Program requirements.

Acknowledge that the attached settlement agreement of $325,000 represents an amount due HUD from Pacific Horizon.

Acknowledge that the attached settlement agreement for $15,000 represents an amount due HUD from the two loan officers.

Acknowledge that $3,375,163 in the attached settlement agreement represents an amount due HUD, less DOJ’s civil debt collection fees

Acknowledge that the $6,749,673 in the attached indemnification agreement represents an amount due HUD.

Acknowledge that $32,500,000 in the attached settlement agreement represents an amount due HUD, less DOJ’s civil debt collection fees.

We recommend that the Director of the Office of Block Grant Assistance require the Texas General Land Office to implement appropriate cost controls, including limits for reconstruction and rehabilitation costs, to ensure that it uses limited government resources in a more economical and efficient manner. Those costs should not exceed the costs that would be incurred by a prudent person under similar circumstances.

We recommend that the Director of the Office of Block Grant Assistance require the Texas General Land Office to evaluate whether its programs would benefit from a longer affordability period and take appropriate actions to ensure that low- and moderate-income communities have access to affordable homes for an adequate period.

We recommend that the Director of the Office of Block Grant Assistance require the Texas General Land Office to ensure that the tax burden implications are a part of the determination of whether to spend significantly more than the damaged home’s appraised value to replace the home. This measure would include ensuring that participants are fully informed of the substantial and material property tax consequences that they could incur based on the increased values of their reconstructed homes (appendix B).

Require lenders to obtain the borrowers’ consent to verify the existence of delinquent Federal taxes with the IRS during loan origination and deny any applicant with delinquent Federal tax debt and no payment plan or a noncompliant payment plan or an applicant refusing to provide consent from receiving FHA insurance to put at least $6.1 billion to better use by avoiding potential future costs to the FHA insurance fund.

Status

The Office of Single Family Housing will need additional tax information from the Internal Revenue Service to complete the planned action. In July 2024, Single Family Housing proposed closing the recommendation with no action because the primary action discussed would require Congressional authorization, and another option discussed would place an undue burden on borrowers and lenders and was not practical. OIG disagreed with the request. Since delinquent tax debtors are ineligible for FHA loans under existing FHA and OMB guidelines, OIG will continue to work with Single Family Housing on a solution.

Analysis

To fully address this recommendation, HUD will need to provide evidence that it established a method of borrower consent to verify the existence of delinquent federal taxes.

Implementation of this rule should result in HUD putting $6.1 billion to better use.

Revise HUD handbooks for forward and reverse mortgages to reflect that tax liens and judgments are no longer reported on credit reports.

Revise HUD handbooks for forward and reverse mortgages for uniformity in the treatment of delinquent tax debt and the existence of payment plans as only the forward mortgage handbook requires 3 months of payments.

Reimburse its program from non-Federal funds for the $62,377 used to pay for the excess executive compensation.

Develop and implement written policies, procedures, and other financial controls to ensure that Sections 8 and 9 funds are not used to pay for compensation over the salary limit.

Reimburse the U.S. Treasury from non-Federal funds for the $5,000 in ineligible costs paid to its contractor.

Develop and implement written policies and procedures for the payment review process to comply with applicable regulations in 2 CFR Part 200.

Train its staff on its newly developed policies and procedures noted in recommendations 1B and 1D.