The U.S. Department of Housing Urban Development (HUD), Office of Inspector General audited the HUD to determine whether it collected partial claims upon termination of their related Federal Housing Administration (FHA)-insured mortgages.  We initiated this audit because of our concern that FHA partial claims could go uncollected.

HUD did not collect an estimated 1,361 partial claims that became due in fiscal year 2015.  As a result, partial claims totaling approximately $21.5 million were not returned to the FHA insurance fund.

We recommend that HUD’s Acting Deputy Assistant Secretary for Single Family Housing (1) require HUD’s loan servicing contractor to complete the necessary debt collection efforts for an estimated $21.5 million in uncollected partial claims that became due during fiscal year 2015, (2) add a performance requirement measuring partial claims collection to HUD’s contractor’s performance work statement to put more than $21.5 million to better use, and (3) strengthen procedures to better identify and resolve all due and payable partial claims.