Update and implement internal procedures to require verification that tenant protection funds were not previously allotted for the same type of housing conversion action.

For the remaining retroactive RAD conversion not completed, to take steps, including but not limited to maintaining adequate approval documentation to ensure that it enforces its requirement that the tenant protection assistance is provided to tenants before the submission of the RAD application.

For the remaining retroactive RAD conversion not completed, to take steps including but not limited to training staff responsible for reviewing and approving RAD applications to ensure that it enforces its requirement that the tenant protection assistance is provided to tenants before the submission of the RAD application.

Develop and implement policy and procedures for the incremental obligation process used for project-based Section 8 funds, including documentation for determining the incremental amounts and controls to review the amounts for accuracy.

Update HUD’s loss mitigation policies, to include deadlines for the servicers to file the FHA-HAMP nonincentivized partial claims, and consider imposing sanctions for noncompliance with these deadline requirements.

Update HUD’s loss mitigation policies, to include deadlines for the servicers to report the new terms of the FHA-HAMP nonincentivized loan modifications, and consider imposing sanctions for noncompliance with these deadline requirements.

Ensure that the HECM cash flow model assumptions capture all valid assignments or provide an analysis showing that the model results are not biased due to the exclusion of valid HECM assignments.

Document and implement policies and procedures to ensure that data observations for key assumptions that are inconsistent with FHA’s understanding of program operations are researched and further analyzed and that all results are concurrently documented and included in the model documentation.

Update the posting models to ensure that refunds relating to payments made in prior years are properly recorded in accordance with OMB Circular A-11.

Correct the programming error in the HERMIT system to ensure that the correct insurance-in-force balances are reported on the note disclosures.

Develop policies and procedures to ensure that the line items in the required note disclosures are understood, properly calculated, and properly disclosed in the financial statements in accordance with OMB Circular A-136.

Take appropriate enforcement actions against the responsible parties and pursue civil action against the owner for improperly certifying to the eligibility of the project residents.

Pursue administrative actions, as appropriate, against the responsible parties for the improper certification included in form HUD-50059 and the Section 8 project-based voucher housing assistance payments contract.

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.

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 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. Single Family maintains that without an automated solution from the Internal Revenue Service (IRS), it is not practical for individual borrowers and/or lenders to manually check tax status with the IRS. However, OIG’s position is that action is required since delinquent tax debtors are ineligible for FHA loans under existing FHA and Office of Management and Budget (OMB) guidelines.

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.