Provide training to field staff members to ensure that they have the skills necessary to complete MORs of converted properties.

Review the reserve for replacement account balances for the 13 properties (11 underfunded and 2 overfunded) to determine whether the balances are maintained in accordance with the applicable HUD requirements and executed HUD business documents and require owners to fully fund any underfunded reserves and determine whether any overfunded accounts should have the deposits suspended for a specified period.

Review the HUD business documents, such as the RAD conversion commitment, HAP contract, and regulatory agreement, for the four properties that did not contain consistent reserve for replacement information and update the documents to be consistent as appropriate.

Issue guidance to RAD property owners clarifying that the owner is responsible to follow both the HUD business documents and the property’s business documents and that the most restrictive document indicates the amount and timing of the annual deposits into the reserve for replacement account.

Develop and implement a process to ensure that the reserve for replacement requirements in HUD’s business documents are consistent for all converted properties.

Develop and implement a plan to review the reserve for replacement accounts for all converted properties from the date on which the account was established to the date of the review. Based on the reviews completed, HUD should take appropriate actions to ensure that reserve for replacement accounts are appropriately funded or determine whether overfunded accounts should have the deposits suspended for a specified period.

Implement adequate procedures and controls to ensure that servicing lenders comply with HUD time requirements in scheduling initial inspections of FHA-insured RAD PBV properties.

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.

Update the Conveyance, Assignment, and Assumption Agreement to require purchasers to report final property outcomes and identifying information including those of third-party purchasers when applicable.

Enhance data collection and processing controls to ensure consistency in reporting data.

Enhance existing demonstration guidance within the Conveyance, Assignment, and Assumption Agreement to provide further detail regarding documentation retention requirements.

Housing should include zero trust requirements as part of the Housing Strategic Roadmap for Housing Modernization.

Housing should refine access controls within the FHA Catalyst modules that are dynamic, are tailored to user actions, and require continuous reauthentication to ensure that users have access only to information needed.

Housing should coordinate with HUD’s SOC to a. Ensure that FHA Catalyst user behavior monitoring logs are regularly captured and adequately reviewed for discrepancies in user activities. b. Establish program office responsibility for the log review process.  

We recommend that HUD’s Deputy Assistant Secretary for Fair Housing and Equal Opportunity update protocols to promote consistent expectations for timely supervisory, legal, and headquarters reviews of complex cases.

We recommend that HUD’s Deputy Assistant Secretary for Fair Housing and Equal Opportunity review and update the MOUs with OGC for each region to identify and remove inefficiencies that can lead to longer FHEO investigation times and OGC review times and identify best practices that can be implemented across all regions.

We recommend that HUD’s Deputy Assistant Secretary for Fair Housing and Equal Opportunity review and update investigative processes followed by each regional office to identify best practices that can be implemented across all regions and identify and remove inefficiencies that can lead to longer investigation times.

Require that the PLUS system for receiving, processing, and assigning applications tracks applications and captures application intake, screening, and status, including key dates; captures data on the type of underwriter used; includes a portal for receiving documents and communicating with lenders; and generates FHA loan numbers. This will allow HUD to identify, monitor, and address processing delays and issues on a continuous basis; evaluate its performance and processes; and manage future challenges.

Update policies and procedures to include methods that will be used when applications exceed underwriter capacity, align intake and screening processes, and explain when timeframes will be enforced, including in PLUS.

Issue an industry wide letter to reinforce how intake, screening, and enforcement of timeframes will be handled.