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Document

We audited SecurityNational Mortgage Company’s Federal Housing Administration (FHA) loan origination because it was among 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.

SecurityNational improperly originated FHA loans for seven properties that contained prohibited restrictive covenants.  This condition occurred because SecurityNational did not have adequate policies and procedures in place to identify the prohibited restrictive covenants.  As a result, SecurityNational placed the FHA fund at unnecessary risk for potential losses of $381,823. In addition, HUD paid a claim on one of the seven loans, resulting in actual losses of $26,472.

We recommend that the Deputy Assistant Secretary for Single Family Housing require SecurityNational to (1) work with HUD to nullify the restrictions on conveyance that violate HUD policy or indemnify HUD against future losses of $381,823 for the seven  loans; (2) repay HUD $26,472 for a partial claim paid on one of the 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

  •  
    Status
      Open
      Closed
    2017-LA-1802-001-A
    $408,295.00
    Funds 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, 2019

    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.

  •  
    Status
      Open
      Closed
    2017-LA-1802-001-B
    $26,472.00
    Questioned 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 16, 2018

    Repay HUD $26,472 for partial claims paid on one FHA loan that contained prohibited restrictive covenants.

  •  
    Status
      Open
      Closed
    2017-LA-1802-001-C
    Closed 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.

  •  
    Status
      Open
      Closed
    2017-LA-1802-001-D
    Closed on February 27, 2019

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

General Counsel

  •  
    Status
      Open
      Closed
    2017-LA-1802-001-E
    Closed on June 01, 2018

    Determine legal sufficiency and if legally sufficient, pursue civil and administrative remedies, civil money penalties, or both against SecurityNational, 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.