Update HUD Handbook 1900.40, Do Not Pay policy, to clearly define the responsibilities for all parties and align it with current laws, processes, and procedures. This should include defining responsibilities for preaward and prepayment verification, and developing a process and governance structure to ensure that preaward and prepayment verification are consistently performed across HUD’s programs.

Status

HUD has until August 25, 2025, to provide its corrective action plan to OIG for review.

Analysis

Updating the HUD Handbook 1900.40 will define responsible parties for ensuring compliance with the Do Not Pay Initiative (DNP).    

The implementation of this recommendation will result in consistent use of DNP, allowing for instant verification of eligibility across the billions in payments that HUD processes, resulting in the reduction of future improper payments.

Determine the appropriate timeframe for when initial management and occupancy reviews (MORs) should be completed for all properties that convert under the Rental Assistance Demonstration and issue updated guidance that includes a system to track the timeliness of initial MORs.

Status

Given current resource constraints, HUD will create guidance based on risk-based Management and Occupancy Review (MOR) parameters to ensure that field staff and leadership perform the initial MOR for PBRA RAD-converted properties. This guidance will specify which assessments can be done on-site or remotely (such as desk reviews). Furthermore, the guidance will require that the existing MOR tracking tools (e.g., PowerApps) be used to monitor planning for the MORs and progress throughout, until final closing of the review. As of July 2025, HUD has completed 233 MORs for the 834 RAD-converted properties. The tool allows HUD staff to filter by the type of conversion (e.g. RAD PIH, RAD PRAC, etc.) as well as other risk indicators (e.g., troubled status), location and servicer (e.g. Account Executive, Senior Account Executive, Resolution Specialist). OIG has concurred with HUD's corrective action plan that it will create guidance to allow for a risk-based approach for completing MORs, which HUD anticipates completing by September 30, 2025.

Analysis

To implement this recommendation, HUD needs to provide evidence that it has updated guidance with appropriate timeframe for conducting MORs and a system to track the timeliness of initial MORs. Failure to determine the timing of the initial MORs could delay HUD's performance of them, which may result in property owners' untimely corrective actions, and thus potentially impact the health and safety of families.

The implementation of this recommendation has the potential to directly impact the health and safety of families.

Complete the initial management and occupancy reviews (MORs) for the Rental Assistance Demonstration properties that have not had an initial MOR.

Status

Given current resource constraints, HUD will create guidance based on risk-based Management and Occupancy Review (MOR) parameters to ensure that field staff and leadership perform the initial MOR for PBRA RAD-converted properties. This guidance will specify which assessments can be done on-site or remotely (such as desk reviews). The guidance will outline the timing requirements for when the initial MOR should be completed. To date, HUD staff have completed 233 MORs for the 834 RAD-converted properties. HUD anticipates completing the initial MORs for the remaining 501 properties by the end of 2027. HUD HQ and field staff will use the Power BI MOR tool to track the MOR through the stages: scheduling, review, issuance of report and finally the closing of the report. As of July 2025, OIG has concurred with HUD's corrective action plan that HUD will begin completing the initial MORs using a risk-based approach. The target completion date for HUD to demonstrate it is taking corrective action is set for December 31, 2025.

Analysis

Completing initial MORs would assist HUD in holding property owners accountable for maintaining the conditions of their properties and sufficient reserve for replacement accounts balances, which could impact property owners' ability to make needed capital repairs.

The recommended corrective action has the potential to directly impact the health and safety of families.

Develop and implement a plan to determine how to implement the risk-based approach to review the Rental Assistance Demonstration properties that have not had subsequent management and occupancy reviews (MORs) in more than 3 years and to require periodic MORs going forward.

Status

Given the current resource constraints, HUD will create guidance based on risk-based Management and Occupancy Review (MOR) parameters to ensure that field staff and leadership perform MORs using a risk-based model for PBRA RAD-converted properties. This guidance will specify which assessments can be done on-site or remotely (such as desk reviews) and the timing requirements for when ongoing MORs should be scheduled once the initial MOR is completed. As of July 2025, 641 MORs need to be scheduled for the Office of Asset Management's portfolio of 834 RAD-converted properties. Of those, 85 properties are managed by Performance-Based Contract Administrators (PBCA). Depending on risk indicators for each property, MORs will be scheduled accordingly. HUD reported that its staff resources are limited in comparison to the PBCAs and will therefore take a risk-based approach for prioritizing the MORs that HUD staff must complete. The Office of Asset Management will develop a plan to address the backlog of RAD-converted MORs using the current risk factors which include the physical condition, last MOR score, financial health of the property and other indicators. The target completion date is December 31, 2025.

Analysis

Developing a plan to implement the risk-based approach would establish the criteria for identifying properties that are at a higher risk of noncompliance.

The recommended corrective action would help HUD to monitor property owners' compliance with its requirements and thus, potentially protect families from living in unsafe units.

Determine an appropriate timeframe in which non-FHA-insured Project-Based Rental Assistance (PBRA) properties converted under the Rental Assistance Demonstration should be initially inspected, work with HUD’s Real Estate Assessment Center (REAC) to ensure that inspections are ordered and completed within that timeframe, and update HUD’s publicly available and internal guidance to ensure consistent messaging in accordance with HUD’s determination.

Status

As of July 2025, Multifamily Housing planned to develop and implement adequate policies, procedures, and controls to ensure non-FHA insured PBRA properties under RAD are inspected within 90 days after the original date of the HAP contract, unless the property has been approved for inspection delay during major rehabilitation, then within 90 days after the end of the approved inspection delay. Further, Multifamily Housing will provide appropriate updated guidance to both internal and external partners relative to non-FHA-insured PBRA properties converted under RAD. The target completion date is September 30, 2025.

Analysis

Determining the appropriate timeframe for initial inspections would result in the timely identification and correction of life-threatening and non-life-threatening deficiencies.

The recommended corrective action has the potential to directly impact the health and safety of families.

Develop and implement adequate procedures and controls to ensure that (1) staff issues notices of violation and default within 15 calendar days of the inspection report release date and (2) the Office of Multifamily Asset Management and Portfolio Oversight is made aware when notices are not issued within 15 calendar days after the inspection report release date and takes action as appropriate to ensure that future notices are issued in a timely manner. 

Corrective Action

HUD’s Office of Multifamily Housing created procedures to identify failed inspections and notify the appropriate field office that a property in their portfolio had recently failed inspection. The procedures included a timeline for issuing a Notice of Violation/Notice of Default to the owner of the property. Implementation of the recommendation ensures that multifamily property owners are notified of deficiencies in a timely manner to take corrective actions.

Include language in future notices of violation and default clearly stating that owners are required to inspect all units (including vacant units), common areas, grounds, building systems, and sites as part of the owner survey and require owners to include sufficient detail in the surveys to show (1) when the survey was conducted and (2) that the survey was a complete survey of the project.

Corrective Action

HUD’s Office of Multifamily Housing updated the language in the template document to be used in future notices of violation and default, clearly stating that owners are required to inspect all units (including vacant units), common areas, grounds, building systems, and sites as part of the owner survey and require owners to include sufficient detail in the surveys to show (1) when the survey was conducted and (2) that the survey was a complete survey of the project. Specifically, HUD notified all Asset Management Division Directors informing them of the updates to the templates and instructed them to use the templates. The implementation of this recommendation has the potential to positively and directly impact the health and safety of families.

Perform a complete agency-wide fraud risk assessment (which incorporates the fraud risk assessments performed at the program level) and use the results to develop and implement an agency-wide plan to move HUD’s fraud risk management program out of the ad hoc phase.

Status

As of July 2025, HUD has cancelled its fraud risk management contracts and the Chief Risk Officer position was vacated under the Deferred Resignation Program. HUD is currently working to realign its business process and determining how it will address fraud risk management. While HUD had made progress in improving its fraud risk management program, as of July 2025, HUD has not provided an updated plan on how it will complete an agency-wide fraud risk assessment and undertake office-specific risk programs. The final action target date was September 30, 2024.

Analysis

To fully address this recommendation, HUD must provide evidence that it has performed an agency-wide fraud risk assessment performed at the program level, adopted and implemented its fraud risk assessment program departmental policy, and that each HUD program office has established office-specific risk programs.

Develop a control to detect loans that did not maintain the required flood insurance to put $1.5 billion to better use by avoiding potential future costs to the FHA insurance fund from inadequately insured properties.

Corrective Action Taken

In November 2022, FHA published the Acceptance of Private Flood Insurance for FHA-Insured Mortgages final rule (Docket No. FR-6084-F-02) in the Federal Register and issued Mortgagee Letter 2022-18, Acceptance of Private Flood Insurance for FHA-Insured Mortgages (ML 2022-18). These policy changes not only strengthened Single Family’s Mortgagee requirements regarding flood insurance, but they also introduced the ability for borrowers and Mortgagees to purchase private flood insurance. In January 2023, the sections in ML 2022-18 that pertain to HUD’s forward mortgage programs were superseded by the FHA Single Family Housing Policy Handbook (Handbook 4000.1), adding a requirement that the Mortgagee review all FHA-insured properties annually to determine if the property is located within a Special Flood Hazard Area (SFHA). For properties located within a SFHA, the Mortgagee must ensure flood insurance is in force for the life of the mortgage and that the property has sufficient flood insurance coverage. To ensure compliance with the policy requirements, the Mortgagee must include updated flood insurance information for properties where flood insurance is required in the Servicing and Claims File. In addition, Handbook 4000.1 includes flood insurance servicing policy updates. HUD submitted a revised management decision reflecting this action on June 22, 2023.

Develop a comprehensive process to ensure that complaints received by HUD’s Multifamily Housing Clearinghouse are resolved in a timely manner.

Status

In October 2023, the Office of Multifamily Housing reported that it had sought funding for system enhancements to coordinate tenant complaints. HUD is transitioning the Multifamily Clearinghouse responsibilities to the Federal Housing Administration (FHA) Resource Center. The FHA Resource Center has a system that will allow tracking and monitoring of customer calls. As of July 11, 2025, the Office of Multifamily Housing requested the closure of this recommendation because it did not receive the requested funding from Congress for system enhancements, and it believes there is no prospect of future funding. Further, its alternative action of using the FHA Resource Center to track and monitor customer calls did not work. Developing a comprehensive process for intaking, monitoring, and tracking health and safety complaints would require a system enhancement or creation of a new system, and HUD has repeatedly attempted to obtain funding from Congress to no avail. OIG is in the process of collaborating with HUD on finding a potential corrective action to resolve the recommendation.

Analysis

To fully address this recommendation, HUD needs to develop a comprehensive process to ensure that complaints received by HUD are resolved in a timely manner.

Implementation of this recommendation will result in a timelier resolution of complaints submitted by those living in multifamily member housing units.

Develop agencywide policies and procedures for the intake, monitoring, and tracking of health and safety complaints.

Status

In October 2023, HUD stated that it will develop policies and procedures for Multifamily properties for the intake, monitoring, and tracking of health and safety complaints it receives. The Office of Multifamily Housing has not yet updated its policies and procedures. With no comprehensive, automated, real-time system in place, there was no direction to give the field staff, Multifamily Clearinghouse, or the Performance Based Contract Administrators other than what they were already doing. HUD was in the process of developing an automated monitoring system in the FHA resource center to allow tracking of individual calls and the call’s subject, such as health and safety. HUD missed the final action target date of December 31, 2022, and a new completion goal was set for February 2025. As of July 14, 2025, HUD is seeking closure for this recommendation due to unavailability of funds. HUD stated that its issuance of policies and procedures for a comprehensive process was contingent on the development of a tracking system for the complaint process, for which it has repeatedly requested funding from Congress to no avail. OIG is in the process of collaborating with HUD on finding a potential corrective action to resolve outstanding concerns.

Analysis

To fully address this recommendation, HUD must provide evidence that it has developed and implemented policies and procedures for the Multifamily properties for the intake, monitoring, and tracking of health and safety complaints it receives when using the FHA’s automated monitoring system.

Implementation of this recommendation will result in HUD having a more efficient process for taking in, monitoring, and tracking health and safety complaints and aid HUD in more efficiently addressing those complaints.

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

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 including, but not limited to one of the options OIG provided, which were (1) lenders obtaining the borrowers' consent to obtain their tax records directly from the IRS or (2) borrowers accessing their own tax information and submitting it to the lenders.

Implementation of this rule should result in HUD putting $6.1 billion to better use.

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 including, but not limited to one of the options OIG provided, which were (1) lenders obtaining the borrowers' consent to obtain their tax records directly from the IRS or (2) borrowers accessing their own tax information and submitting it to the lenders.

Implementation of this rule should result in HUD putting $6.1 billion to better use.

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

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 including, but not limited to one of the options OIG provided, which were (1) lenders obtaining the borrowers' consent to obtain their tax records directly from the IRS or (2) borrowers accessing their own tax information and submitting it to the lenders.

Implementation of this rule should result in HUD putting $6.1 billion to better use.

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 including, but not limited to one of the options OIG provided, which were (1) lenders obtaining the borrowers' consent to obtain their tax records directly from the IRS or (2) borrowers accessing their own tax information and submitting it to the lenders.

Implementation of this rule should result in HUD putting $6.1 billion to better use.

Implement a change to regulations at 24 CFR Part 203 to require curtailment of preforeclosure interest and other costs that are caused by lender servicing delays, resulting in $413,513,975 in funds to be put to better use. This should include updating or seeking statutory authority to update HUD’s regulations as necessary and coordinating with HUD’s Office of Finance and Budget, well before any changes go through departmental clearance, to ensure that planned curtailment requirements can be consistently enforced through the claims process.

Status

FHA reported that the audit recommendation cannot be closed without the publication of the FHA Maximum Claim Rule. The proposed changes have been on HUD’s regulatory agenda since Spring 2020 but, as of July 2025, the Office of Single Family Housing does not have an estimated publication date.

Analysis

To fully address this recommendation, HUD must provide evidence that it has published and adopted the rule.

Implementation of this rule should result in HUD putting $413 million to better use.

Develop a method for using the Do Not Pay portal during the underwriting process to identify delinquent child support and delinquent Federal debt to prevent future FHA loans to ineligible borrowers to put $1.9 billion to better use.

Status

The Office of Housing has approved prioritization of funding for Integration between the Treasury’s Do Not Pay portal and HUD’s Computerized Homes Underwriting Reporting System (CHUMS). Funding was allocated to the CHUMS IT contractor on January 26, 2024, to integrate Treasury’s Do Not Pay system with CHUMS, and the IT development project was kicked off the week of February 5, 2024. As of July 2025, the CHUMS Memorandum of Understanding (MOU) and Interconnection Security Agreement (ISA) with DNP is fully signed. However, the System of Records Notice (SORN) is under review with OMB. HUD's Office of Privacy is in the process of reaching out to OMB to request comments or permission to publish. The anticipated completion date of the CHUMS interface with DNP is December 31, 2025.

Analysis

To fully address this recommendation, HUD must provide evidence that it has implemented applicant screening against the Do Not Pay portal to identify delinquent child support and delinquent federal debt to prevent future FHA loans from going to ineligible borrowers.

Implementation of this rule should result in HUD putting $1.9 billion to better use.

Issue a change to regulations at 24 CFR Part 203, which would avoid unnecessary costs to the FHA insurance fund, allowing an estimated $2.23 billion to be put to better use. These changes include (1) a maximum period for filing insurance claims and (2) disallowance of expenses incurred beyond established timeframes.

Status

The Federal Housing Administration (FHA) reported that the recommendation cannot be closed out without the publication of the FHA Maximum Claim Rule. The proposed changes have been on HUD’s regulatory agenda since Spring 2020 but, as of July 2025, the Office of Single Family Housing does not have an estimated publication date.

Analysis

To fully address this recommendation, HUD must publish the FHA Maximum Claim Rule. Implementation of this rule should result in HUD putting $2.23 billion to better use.

Update selection rules for CAIVRS to provide for complete reporting of all ineligible borrowers to put $9.5 million to better use.

Status

In 2020, HUD suspended reporting delinquencies and defaults to the Credit Alert Verification Reporting System (CAIVRS) because these debts are owed to the lender and are not delinquent federal debt. A debt is not delinquent until payment is overdue to HUD for a deficiency judgment against the borrower in connection with an FHA claim. Rather than add the missing borrowers to CAIVRS, the Office of Single Family Housing directed HUD’s National Servicing Center to cease including borrower creditworthiness information in CAIVRS and to solely use the system to report deficiency judgments until the delinquent debt is resolved. HUD provided the Interface Control Document showing what data is sent to CAIVRS related to deficiency judgments.

As of July 2025, OIG is seeking clarification on HUD's implementation and closure of the recommendation because it is not clear whether all deficiency judgments are now being reported in CAIVRS until resolved. HUD OIG disagrees with the closure of this recommendation until HUD provides evidence that the system updates have been implemented and that they provide complete reporting of all ineligible borrowers.

Analysis

To fully address this recommendation, HUD must provide evidence that all deficiency judgments are reported in CAIVRS until resolved.

Implementation of this recommendation should result in HUD putting $9.5 million to better use.