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December 15, 2021
  • Housing
2022-KC-0001
2022KC0001.pdf

The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General (OIG), completed an audit to determine whether FHA-insured borrowers properly received the COVID-19-related forbearance.  The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), signed into law on March 27, 2020, provided a mortgage payment forbearance option for all borrowers who suffered a financial hardship due to the COVID-19 national emergency.

We found that at least one-third of the nearly 335,000 borrowers who were delinquent on their FHA-insured loans and not on forbearance in November 2020, were either not informed or misinformed about the COVID-19 forbearance.  As a result, these borrowers experiencing a hardship due to COVID-19 did not benefit from the COVID-19 forbearance.  We also found that servicers improperly administered the forbearance for at least one-sixth of the nearly 815,000 borrowers on forbearance plans in November 2020.  Servicers also performed excessive communication and collection efforts for borrowers who were already in forbearance. As a result, these borrowers experienced additional burdens from improperly administered forbearance.

We recommend that FHA identify borrowers who are delinquent and did not fully benefit from the COVID-19 forbearance and ensure that information about the CARES Act and COVID-19 forbearance is distributed to these borrowers. We also recommend that FHA review the 21 loans in our statistical sample with improperly administered forbearance to ensure that the borrowers were assisted by the servicers, if possible, and ensure that these servicers updated their forbearance procedures to prevent future noncompliance; ensure that the issues found during our audit are incorporated into servicing monitoring reviews to deter future noncompliance and prevent potential loss to the FHA fund; and provide additional guidance to the servicers so that they limit their communication and collection efforts for the borrowers in forbearance.

Recommendations
Recommendation Status Date Issued Summary
2022-KC-0001-001-A Closed December 15, 2021 Perform data analysis of FHA’s portfolio to identify borrowers who are delinquent and did not fully benefit from the COVID-19 forbearance, including those in bankruptcy;
2022-KC-0001-001-B Closed December 15, 2021 Develop a standardized brochure or informational pamphlet that would inform delinquent borrowers of their right to a forbearance under the CARES Act; and
2022-KC-0001-001-C Closed December 15, 2021 Ensure that this information is distributed to delinquent borrowers so it can benefit the greatest number of borrowers to put $5.43 billion to better use by avoiding potential future losses on 112,160 loans.
2022-KC-0001-002-A Open December 15, 2021 Review the 21 loans with improperly administered forbearance to ensure that the borrowers were remedied by the servicers, if possible, and ensure that these servicers updated their forbearance procedures to prevent future noncompliance;
2022-KC-0001-002-B Closed December 15, 2021 Ensure that the issues found during our audit are incorporated into QAD’s servicing monitoring reviews.
2022-KC-0001-002-C Closed December 15, 2021 Provide additional guidance to the servicers so they will limit their communication and collection efforts for the borrowers in forbearance.