We audited RMS & Associates’ Federal Housing Administration (FHA) loan origination because it was one of the top lenders that originated FHA-insured loans with downpayment assistance from the City of Las Vegas. A previous U.S. Department of Housing and Urban Development, Office of Inspector General (HUD OIG), audit (Evergreen Home Loans, 2016-LA-1011) found that Evergreen originated FHA-insured loans in connection with the City of Las Vegas' downpayment assistance program that contained prohibited legal restrictions on conveyance.
RMS improperly originated FHA loans for 49 properties that contained prohibited restrictive covenants. This condition occurred because RMS did not have adequate policies and procedures in place to identify the prohibited restrictive covenants. As a result, RMS placed the FHA fund at unnecessary risk for potential losses of more than $2.4 million. In addition, HUD paid partial claims on 2 of the 49 active loans, resulting in actual losses of $26,242.
We recommend that the Deputy Assistant Secretary for Single Family Housing require RMS to (1) work with HUD to nullify the restrictions on conveyance that violate HUD policy or indemnify HUD against future losses of $2.4 million for the 49 loans; (2) repay HUD $26,242 for partial claims paid on two FHA loans that contained prohibited restrictive covenants; (3) 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; (4) provide training to its employees regarding HUD’s requirements related to prohibited restrictions on conveyance. We also recommend that HUD’s Associate General Counsel for Program Enforcement pursue civil and administrative remedies, if legally sufficient.
Recommendations
Housing
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Status2017-LA-1803-001-AOpenClosed$2,460,446.00Funds Put to Better Use
Recommendations that funds be put to better use estimate funds that could be used more efficiently. For example, recommendations that funds be put to better use could result in reductions in spending, deobligation of funds, or avoidance of unnecessary spending.
Closed on March 06, 2019Work with HUD to nullify the restrictions on conveyance that violate HUD policy or indemnify HUD. This action will protect HUD against future losses of $2,434,204 for the 49 loans.
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Status2017-LA-1803-001-BOpenClosed$26,242.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Closed on January 05, 2018Repay HUD $26,242 for partial claims paid on two FHA loans that contained prohibited restrictive covenants.
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Status2017-LA-1803-001-COpenClosedClosed on February 27, 2019
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.
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Status2017-LA-1803-001-DOpenClosedClosed on February 27, 2019
Provide training to its employees regarding HUD’s requirements related to prohibited restrictions on conveyance.
General Counsel
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Status2017-LA-1803-001-EOpenClosedClosed on June 01, 2018
Determine legal sufficiency and if legally sufficient, pursue civil and administrative remedies, civil money penalties, or both against RMS, its principals, or both for incorrectly certifying to the eligibility for FHA mortgage insurance or that due diligence was exercised during the origination of FHA loans.