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

Provide training and technical assistance to the owner and its management agent to ensure compliance with the terms of its regulatory agreement and applicable HUD requirements.

Submit a project owner’s or management agent’s certification for identity-of-interest agents, a management entity profile, a management plan, and other required documentation for review and approval.

Request retroactive approval of the fees paid to the identity-of-interest entity totaling $402,975 and any fees incurred outside our audit period, including fiscal year 2017, when submitting the project owner’s or management agent’s certification for identity-of-interest agents in response to recommendation 2A. If the request is not approved retroactively, the owner should repay the project from nonproject funds for the amount that was not approved.

Evaluate the owner’s capability to effectively manage the project and consider whether independent professional management services are needed.

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 $381,823 for the seven loans.

Repay HUD $26,472 for partial claims paid on one FHA loan 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.

Develop and implement controls over owner contributions and owner distributions to ensure compliance with its regulatory agreement and HUD regulations.

Complete HUD-approved training regarding owner contributions and distributions.

Repay its project’s operating account for the ineligible $15,000 disbursement from non-project funds.

Perform an analysis of all security deposits and ensure that the security deposit account is fully funded.

Implement controls to ensure existing procedures are followed to maintain the project’s security deposit funds separately from all other accounts by depositing and disbursing all security deposit funds directly into and from the security deposit account.

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 $418,277 for the eight loans.

Repay HUD $5,482 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.

We recommend that the Deputy Assistant Secretary for Single Family Housing require MB Financial to indemnify HUD against potential losses of $178,811 for the four loans that did not comply with underwriting requirements (appendix C). HUD provided us copies of the four executed indemnification agreements in August and September 2017. Therefore, upon issuance of this report, we will enter a management decision into HUD’s Audit Resolution and Corrective Action Tracking System, along with copies of the indemnification agreements, and close this recommendation.

We recommend that the Deputy Assistant Secretary for Single Family Housing require MB Financial to provide training to its underwriters on HUD’s underwriting requirements for approving and rejecting loans.