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We audited the Federal Housing Administration (FHA), Office of Asset Sales’ U.S. Department of Housing and Urban Development (HUD)-Held Vacant Loan Sales (HVLS) program.  The audit objective was to assess the extent to which HUD achieved its mission objectives for a 2022 vacant loan sale.  We noted deficiencies in 52 of 53 HUD-approved applications within the reviewed vacant loan sale.  These deficiencies occurred in transactions for all seven purchasers that purchased loans in the sales.  HUD risks not achieving its mission objectives to promote sales first to mission-driven entities or to encourage mission outcomes by allowing purchasers that submitted deficient applications to purchase distressed FHA loans.

Recommendations

Housing

  •   2024-KC-0001-001-A

    Require the transaction specialist contractor to change its application review process to prevent incomplete applications from being considered during vacant loan sales and that recommendations to approve applications are supported by written analysis.

  •   2024-KC-0001-001-B

    Implement improved verification checks to prevent participation of restricted entities.

  •   2024-KC-0001-001-C

    Implement an improved process to review and update program controls before each sale to achieve its mission objectives.