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.

Implement adequate procedures and controls to ensure that all required data are complete, accurate, and reported in a timely manner. These procedures and controls should include but not be limited to ensuring that all transactions are recorded and reported within the proper period and listing the source of each of the data elements, including how to obtain the source documentation from HUD’s various program offices or systems.

Implement adequate procedures and controls to ensure that all data elements are traceable to the source documentation.

Revise internal DATA Act policy and procedure documents to resolve inconsistencies to ensure full, appropriate, and consistent implementation of the DATA Act.

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.

Revise HUD handbooks for forward and reverse mortgages for uniformity in the treatment of delinquent tax debt and the existence of payment plans as only the forward mortgage handbook requires 3 months of payments.

Reimburse the project $17,761 from nonproject funds for the project operating funds disbursed for ineligible expenses.

Support or reimburse the project $17,653 from nonproject funds for the project operating funds disbursed without sufficient supporting documentation.

Reclassify and properly record $45,000 in owner advances misclassified as loans.

Strengthen controls to ensure that project advances are reimbursed only when the project is in a surplus-cash position.

Implement adequate controls to ensure the review of the management agent fee to ensure that it is properly calculated in accordance with the HUD management agent certification and approved prior to payment from project operating funds.

Implement adequate controls to ensure that project funds are used only for eligible and supported operating expenses.

Obtain a formal agreement and approval from HUD to specify who is authorized to use the project’s community and recreation rooms and what activities are authorized or prohibited. In addition, this agreement must ensure that sufficient legal and liability protections are in place, establish consequences for noncompliance, and determine who is to pay for the utilities and maintenance of the rooms.

Amend the management agent agreement compensation schedule to remove bookkeeping fees as a fee separate from the 8.9 percent management agent fee.

Reimburse HUD $30,037 from nonproject funds for the overpayment of housing assistance and utility allowances due to incorrect calculations.

Reimburse the appropriate households $144 from nonproject funds for the underpayment of housing assistance due to incorrect calculations.

Support or reimburse HUD $159,938 from nonproject funds for the unsupported payments of housing assistance cited in the finding.

Pursue collection from the applicable household or reimburse HUD $26,915 from nonproject funds for the overpayment of housing assistance due to unreported income.

Implement adequate quality control procedures to ensure that housing assistance payments are appropriately calculated and supported. These procedures and controls should ensure that $54,257 in program funds is appropriately used for future payments.