We audited HUD’s appraiser review process as part of our annual plan. The audit was proposed in response to a single-family loan origination audit that raised concerns regarding HUD’s oversight of FHA appraisers. This is the second of two audits covering HUD’s controls over the appraiser review process. The first audit report, 2008-LA-0002, focused on HUD’s oversight of the FHA appraiser roster; whereas this audit report focuses on the...

The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General, reviewed James B. Nutter and Company's (J.B. Nutter) quality control program. Our objective was to determine whether J.B. Nutter followed HUD's quality control requirements for home equity conversion mortgages insured by the Federal Housing Administration (FHA). We concluded that for six months in 2007 and 2008, J.B. Nutter did not meet HUD's...

We completed a review of First Source Financial USA (First Source), a former nonsupervised loan correspondent approved to originate FHA-insured loans. The objective was to determine whether First Source originated FHA loans and had a quality control plan that complied with HUD rules and regulations. We reviewed 20 loans amounting to more than $2.5 million that were in claim status. Our review disclosed that First Source: (1) allowed...

We completed an audit of Wells Fargo Bank NA, Rochester, New York, Branch Office (Wells Fargo), a national bank and supervised lender. The audit objectives were to determine whether Wells Fargo (1) approved insured loans in accordance with U.S. Department of Housing and Urban Development (HUD)/Federal Housing Administration (FHA) requirements, which include following prudent lending practices, and (2) developed and implemented a quality control...

The U.S. Department of Housing and Urban Development (HUD) Office of Inspector General reviewed 23 Federal Housing Administration (FHA) loans underwritten by Peoples Bank of Overland Park , Kansas . Our audit objectives were to determine whether Peoples Bank followed HUD requirements for (1) borrower eligibility and creditworthiness and property eligibility when underwriting loans and (2) implementing a quality control program. We concluded that...

We audited the Newark, Delaware, branch office (branch office) of Wells Fargo Home Mortgage (Wells Fargo). The branch office is mainly responsible for underwriting loans for 22 Wells Fargo sales branch offices in Pennsylvania. We selected the branch office because of its relatively high default rate, compared with the average default rate for the state of Pennsylvania. Our objective was to determine whether the branch office complied with U.S....

HUD OIG audited Meridian Lending, Inc., a Federal Housing Administration (FHA)-approved direct endorsement lender. The objectives were to determine whether it followed the U.S. Department of Housing and Urban Development's (HUD) requirements for (1) borrower eligibility and creditworthiness and property eligibility when underwriting loans and (2) implementing a quality control program. Meridian did not follow HUD requirements in originating...

We audited the Milford, Connecticut, branch office of Countrywide Bank, FSB (Countrywide), which is a supervised national bank approved by the U.S. Department of Housing and Urban Development (HUD) to originate, underwrite, and service Federal Housing Administration (FHA) single-family insured loans. We selected the Milford, Connecticut, branch office largely based on a lender risk analysis, which showed that the loans it originated had a higher...

The U.S. Department of Housing and Urban Development's (HUD) Office of Inspector General reviewed HUD's oversight of projects that opted out of the Section 8 program between January 1, 2004, and December 31, 2007. We reviewed the opt-out process because it involved large amounts of funds potentially not accounted for or remitted to HUD. With a few minor exceptions, HUD complied with applicable requirements while administering the opt-...

We reviewed Senior Reverse Mortgage Services, Incorporated (originator), a home equity conversion mortgage (HECM) originator. The originator originated loans for one of the largest lenders in Texas, Financial Freedom Senior Funding Corporation. Our objective was to determine whether the originator complied with U.S. Department of Housing and Urban Development (HUD) regulations and adequately counseled borrowers and disclosed costs. Generally,...

We concluded that Single Family could improve the reliability of its process for reporting performance measure results. Single Family has a performance measurement process in place; however, it could make the process more reliable if it routinely evaluated data used for performance measure results and formally documented its structure and process for developing, monitoring, and reporting on performance measures. We recommended that HUD establish...

We completed an audit of Mortgage Access Corporation, doing business as Weichert Financial Services, a nonsupervised lender located in Morris Plains, New Jersey. The audit objectives were to determine whether Mortgage Access Corporation (1) approved insured loans in accordance with U.S. Department of Housing and Urban Development (HUD)/Federal Housing Administration (FHA) requirements, and (2) developed and implemented a quality control plan...

We audited A Plus Mortgage, Inc. (A Plus), to determine whether (1) the fees charged to Federal Housing Administration (FHA) borrowers by A Plus were appropriate under U.S. Department of Housing and Urban Development (HUD), FHA, and Real Estate Settlement Procedures Act (RESPA) regulations and (2) the loan officers originating FHA-insured loans were employees of A Plus. A Plus disregarded HUD FHA requirements and provisions of RESPA and engaged...

Our audit objective was to determine whether Elders Place, Incorporated, (Elders Place, Inc.), administered project operating funds in accordance with U.S. Department of Housing and Urban Development (HUD) requirements. Elders Place, Inc., did not administer project operating funds in accordance with HUD requirements. It made more than $309,900 in unsupported disbursements and more than $73,400 in ineligible disbursements and, thereby, did not...

We audited HUD's controls over the FHA appraiser roster in response to a single-family loan origination audit that had raised concerns about FHA appraisers and appraisals. We reviewed HUD's appraiser roster (roster) to determine whether HUD's controls over the roster were adequate to ensure that only qualified/eligible appraisers were placed on the roster and whether the oversight and maintenance of the roster were sufficient to...

We reviewed the use of contract fee inspectors by the Office of Multifamily Housing Boston Hub (Boston Hub) as part of our 2007 annual audit plan. This review was initiated because U.S. Department of Housing and Urban Development (HUD) staff rely on contract fee inspectors to oversee the work of contractors performing renovation work on HUD-insured properties. Our objective was to determine whether the Boston Hub effectively used contract fee...

Based on a hotline complaint, we reviewed whether the Phoenix Apartments multifamily project located in Concord, California, used its project funds in accordance with HUD rules and regulations. We found that the project did not use project funds in accordance with the requirements of its regulatory agreement and applicable HUD rules and regulations. Specifically, during fiscal years 2004, 2005, and 2006, the project used $89,751 of its funds...

HUD OIG audited the U.S. Department of Housing and Urban Development's (HUD) Quality Assurance Division because the results of some previous OIG audits indicated that the Quality Assurance Division might not have consistently followed its requirements. Our objective was to determine whether HUD's Quality Assurance Division consistently required Federal Housing Administration (FHA)-approved lenders to indemnify loans with similar...

We completed an audit of Richard A. Hutchens and Associates (agent) pertaining to its management of the financial operations of Cayuga Village and Touraine Apartments. The objectives of our audit were to determine whether the agent used project funds in accordance with the regulatory agreement and HUD requirements. Specifically, to determine whether the agent (1) provided adequate documentation to support the reasonableness of payments made to...