The U.S. Department of Housing and Urban Development's (HUD) Office of Inspector General audited HUD’s Office of Lender Activities and Program Compliance, Quality Assurance Division. We did this review because during a prior audit, we saw instances in which indemnification agreements were not obtained from lenders under certain circumstances. Our objective was to determine whether the U.S. Department of Housing and Urban Development (HUD) had adequate controls to track, obtain, and record indemnification agreements from lenders for materially deficient loans.

HUD’s Quality Assurance Division had written policies and procedures for determining when an indemnification agreement was appropriate and how to process a signed agreement. However, it did not have written policies and procedures for pursuing the signed indemnification agreement from lenders.

We recommended the Quality Assurance Division develop and implement effective policies and procedures to ensure that its employees consistently pursue signed indemnification agreements.