We recommend that the Director of HUD’s Houston Office of Community Planning and Development require the Department to support the $240,010 in unsupported procurement payments or repay its CDBG program from non-Federal funds.

We recommend that the Director of HUD’s Houston Office of Community Planning and Development require the Department to report $22,872 in program income to HUD and properly use program income.

We recommend that the Director of HUD’s Houston Office of Community Planning and Development require the Department to correct its HOME matching liability report to include the recalculated amount for 2014 and pay the matching liability of $3,301.

We recommend that the Director of HUD’s Houston Office of Community Planning and Development require the Department to confirm that it has developed and implemented written procurement procedures to ensure that future contracts and subrecipient agreements address the procurement and required provision issues identified in the report.

We recommend that the Director of HUD’s Houston Office of Community Planning and Development require the Department to ensure that all program files include required documentation and support.

We recommend that the Director of HUD’s Houston Office of Community Planning and Development require the Department to monitor subrecipients annually as stated in its monitoring policy.

We recommend that the Director of HUD’s Houston Office of Community Planning and Development require the Department to train its staff regarding HUD requirements and regulations or seek technical assistance.

Revise servicing review and monitoring policies and procedures to emphasize increased controls on reviewing claim loans showing that no loss mitigation evaluation occurred. Revising the policies and procedures would reduce the risk to HUD and result in a projected $120,902,564 in funds to be put to better use (appendix A).

Develop and implement policies and procedures to ensure that the Office of Single Family Asset Management and Office of Lender Activities and Program Compliance communicate the results of their servicing reviews to each other.

Update and revise policies and procedures, including reinforcement of guidance (for example, mortgagee letters, notifications to servicers, or training) to ensure that servicers accurately report the status of delinquent loans to HUD.

Require indemnification for the 26 loans that had significant servicing deficiencies. In these cases, the loss to HUD was $1,673,117 (appendixes A and D).

Reinforce existing guidance (such as mortgagee letters, notifications to servicers, and training) to servicers to ensure that they engage in required loss mitigation.

Require that the servicers with significant and other deficiencies revise and update their policies and procedures, as necessary, to ensure that they comply with HUD requirements and guidance on loss mitigation evaluation.

Modify the recapture provisions of the 35 home-buyer assistance agreements totaling $488,519 to meet HUD recapture requirements relating to the sales price, closing costs, and net proceeds.

Update its procedures to ensure that any additional home-buyer assistance agreements contain recapture provisions that meet HUD recapture requirements relating to the sales price, closing costs, and net proceeds.

Train its staff to ensure that recapture amounts do not exceed net sales proceeds.

Revise and implement written policies and procedures for managing and accurately tracking all NSP3 activity to ensure that the $12,275 in identified closing cost refunds and any additional refunds identified in recommendation 2B are not overpaid by recipients.

Identify any additional closing cost refunds for NSP3 properties using the general ledger, DRGR supporting documentation, and the property file and either repay the recipients from non-Federal funds or update its tracking spreadsheet.

Repay $95 from non-Federal funds to the two recipients who paid more than the assistance provided (appendix E).

Repay the program $1,495 for closing cost expenses not incurred from non-Federal funds and remove the expenses from program records if the City incorrectly recorded the refunds as program income.