Improve its quality control procedures to accurately track and conduct reviews in a manner that ensures all properties in its active inventory comply with HUD’s and its own requirements to prevent $594,000 in monthly routine inspection fees from being spent over the next year for properties that are not adequately maintained. The quality control procedures should include but not limited to continued training of BLM’s staff and subcontractors on properly identifying and addressing property deficiencies; maintaining sufficient documentation of its monthly quality control reviews and corrective actions; verifying that the datestamped photographs were for the corresponding inspection dates; and regularly updating its tracking mechanism for desktop reviews of inspections to ensure that it conducts desktop reviews for properties that are still in its inventory.

Assess BLM’s performance under the area 4P contract at least quarterly to determine whether it has improved its performance. If its performance does not improve, HUD in coordination with the Office of the Chief Procurement Officer should determine whether BLM has defaulted on its contract and take the appropriate actions.

Update the terms in the purchase agreement to ensure that the agreements define “extenuating circumstance” in reference to foreclosure avoidance, establish how long stabilization outcomes can continue to be reported as planned, and establish financial or other penalties to hold purchasers accountable in instances of nonreporting and noncompliance.

Direct the applicable lenders to provide evidence that the properties for the 1,383 FHA-insured loans not included in our sample had a safe and potable water source, or that the appraisers had not notified the lender of the water quality issue on their appraisals. If the lenders cannot provide this evidence, HUD should direct them to perform water testing and any necessary remediation to ensure that the properties have a safe and potable water source, or indemnify HUD against future loss.

Take appropriate administrative action against the lenders or appraisers for any cases in which it finds that they did not take appropriate steps to ensure that properties had a safe and potable water source.

Develop and implement additional guidance to advise lenders and appraisers when water testing is required for properties serviced by a public water system which has issued a public notice of water contamination.

Develop and implement policies and procedures to ensure that appraisers comply with guidance implemented to resolve recommendation 1C, including penalties for failure to comply, thereby ensuring that at least $238,090,214 million is put to better use.

Consider requiring water testing for all FHA-insured properties.

Review the Authority’s non-Sound Families Initiative project-based voucher projects to determine whether it executed the agreement with the owners of new construction projects.

Assist the Authority in obtaining any training needs identified by the review in recommendation 1A.

Require the Authority to submit evidence and its board of directors to certify to the Director of the Seattle Office of Public Housing that it has complied with regulatory requirements for each step of the project-based voucher process for each new project-based voucher project until such time as the Director of the Seattle Office of Public Housing believes the Authority understands and is consistently complying with the requirements.

Work with HUD to nullify the restrictions on conveyance that violate HUD policy or indemnify HUD. This action will protect HUD against future losses of $2,434,204 for the 49 loans.

Repay HUD $26,242 for partial claims paid on two FHA loans that contained prohibited restrictive covenants.

Develop and implement policies and procedures to identify prohibited restrictions on conveyance to ensure that it does not originate FHA loans with prohibited restrictive covenants.

Provide training to its employees regarding HUD’s requirements related to prohibited restrictions on conveyance.

Reimburse its program $373,860 ($302,638 in ineligible housing assistance payments $63,643 in associated administrative fees $7,579 in program funds paid to the contractor) from non-Federal funds for the inappropriate payments cited in this finding.

Seek retroactive approval or reimburse its program $358,237 ($339,908 in housing assistance payments $18,329 in program funds paid to the contractor) for the housing quality standards inspections of units owned by entities substantially controlled by the Authority, completed by contractors that were not approved by HUD.

Implement adequate procedures and controls to ensure that the Authority complies with HUD’s requirements for program conflicts of interest, including but not limited to ensuring that (1) its staff does not complete inspections for units owned by entities substantially controlled by the Authority, (2) its staff is appropriately trained and familiar with HUD’s requirements for units owned by entities it substantially controls, and (3) future contracts to perform housing quality standards inspections for program units owned by entities substantially controlled by the Authority are with a HUD-approved independent third party.

Reimburse its program $163,316 from non-Federal funds ($29,074 in housing assistance due to calculation errors 74,957 due to inappropriate voucher sizes, payment standards, and utility allowances $18,141 $41,144 in administrative fees) for the inappropriate payments cited in this finding.

Reimburse the appropriate households $9,280 ($2,588 in housing assistance underpayments due to calculation errors $6,692 due to inappropriate voucher sizes, payment standards, and utility allowances) from program funds for the inappropriate underpayments cited in this finding.