Require Majestic Management to reimburse the appropriate projects their portion of $231,091 for work not completed or overbilled.

Require Majestic Management to provide support that $462,281 paid for procurements was reasonable or reimburse the appropriate projects for the balance.

Reimburse the appropriate projects their portion of $11,184 that it charged for ineligible items.

Provide documentation to support that $48,891 was spent for eligible purposes or reimburse the appropriate projects for the balance.

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

This audit recommendations cannot be closed out without the publication of the Federal Housing Administration (FHA): Maximum Claim Rule. The proposed changes have been on HUD’s regulatory agenda since Spring 2020 but, as of June 2024, 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.

Reimburse FHA borrowers $25,700 for fees that were not customary or reasonable and $46,510 in discount fees that did not represent their intended purpose.

Reimburse $13,726 to FHA borrowers for the fees that were not customary or reasonable.

Comply with its Management Agent Handbook requirements that stipulate HUD must perform management reviews of the management agent’s central office activities as well as regular onsite reviews of functions carried out at the projects. These central office reviews should be performed at least once every 18 months.

Implement controls to prevent or reduce instances of borrowers violating HECM program residency requirements by concurrently participating in multifamily programs, including policies and procedures to at least annually coordinate with HUD’s Office of Multifamily Housing Programs to match borrower data in the Single Family Data Warehouse to member data in the Tenant Rental Assistance Certification System.

We recommend that HUD’s Deputy Assistant Secretary for Single Family Housing require the lenders to support that the repairs to the properties associated with the 32 loans without evidence of permits complied with local code or reimburse HUD $792,837 for the escrow repair funds.

We recommend that HUD’s Deputy Assistant Secretary for Single Family Housing require the lenders to support that the repairs to the properties associated with the six loans were not structural repairs or indemnify HUD for the four active loans with a total estimated loss of $222,073 and reimburse HUD for the actual loss of $83,322 incurred on the sale of two properties associated with FHA case numbers 052-4308836 and 034-8239100.

We recommend that HUD’s Deputy Assistant Secretary for Single Family Housing require the lenders to support that the borrower for FHA case number 451-1165810 was not reimbursed for the cost of labor or indemnify the loan with an estimated loss amount of $83,715, based on the loss severity rate of 50 percent of the unpaid principal balance of $167,429 as of January 29, 2015.

Support that the repair conditions and comments indicated in the direct endorsement underwriter form, form HUD-54114, were satisfied for FHA case number 501-8198149. If the repair conditions and comments were not properly addressed, the lenders should indemnify the loan with an estimated loss amount of $39,367, based on the loss severity rate of 50 percent of the unpaid principal balance of $78,733 as of January 29, 2015.

Determine the number of 203(k) loans impacted by the incorrect loan-to-value ratio for mortgage insurance premium calculations and when applicable, reimburse borrowers or apply the overpaid premiums as credits toward borrowers’ future premium payments.

Reimburse FHA borrowers $376,102 for the unallowable, misrepresented discount fees and $7,110 for fees that were not customary or reasonable.

Implement controls to prevent or mitigate instances of borrowers violating HECM program residency requirements by concurrently participating in the Voucher program, including policies and procedures to at least annually coordinate with HUD’s Office of Public Housing to match borrower data in the Single Family Data Warehouse to member data in the Public Housing Information Center.

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 a payment is past due to HUD for a deficiency judgment against the borrower in connection with an FHA claim. Rather than add the missing borrowers to CAIVRS, HUD determined it would remove default and claim data from the system and use it to exclusively identify borrowers with delinquent Federal debt. This will resolve the issue of incomplete reporting of delinquent federal debts greater than 3 years old. As of early June 2024, the Office of Single Family Housing stated that it was on target to complete its action plan by June 28, 2024.

Analysis

To fully address this recommendation, HUD must provide evidence that it removed default and claim data from CAIVRS.

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

We recommend that the Director, Office of Multifamily Asset Management, require that each Hub or field office review its refinanced Section 202/223(f) projects for debt service savings amounts, utilizing data provided from this audit for possible additional debt service savings. Where legally possible each Hub or field office should identify, account for by project, and use these amounts for current and future opportunities benefiting tenants or to fund reductions in housing assistance payments.

We recommend that the Director of HUD’s Detroit Office of Multifamily Housing Programs require the Authority to ensure that $31,148,477 in residual receipts for the 15 projects as of May 31, 2013, is used to reduce or offset housing assistance payments in accordance with HUD’s requirements.

We recommend that the Director of HUD’s Detroit Office of Multifamily Housing Programs require the Authority to reimburse the U.S. Treasury $608,337 ($77,856 436,759 $93,722) for the three projects with terminated program contracts.