We audited HUD Federal Housing Administration’s (FHA) Home Affordable Modification Program (HAMP) partial claim option.  We audited the FHA-HAMP partial claim option because we had not reviewed the program since 2011 and the requirements had changed.  Our audit objective was to determine whether HUD had adequate controls over FHA-HAMP partial claim payments.

HUD’s claim payment controls for the FHA-HAMP partial claim option were not adequate.  Specifically, HUD’s claim system allowed payment of (1) more than one claim with a modification or FHA-HAMP option in a 24-month period, (2) duplicate claims, (3) partial claims in excess of 30 percent of the unpaid principal balance at initial default, and (4) non-HAMP partial claims after HUD discontinued this claim type.  These conditions occurred because HUD did not design and implement sufficient claim payment controls to detect and prevent processed claims that did not meet HUD requirements.  As a result, HUD paid more than $22 million in unsupported claims and $103,925 in ineligible claims that did not meet HUD requirements. 

We recommend that the Deputy Assistant Secretary for Finance and Budget (1) develop and implement controls to detect and prevent payment of claims that violate HUD requirements, (2) provide support of eligibility or require repayment for more than $22 million in claims that did not meet HUD requirements, and (3) require repayment of $103,925 for ineligible claims