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Report Fraud, Waste and Abuse
May 20, 2016
  • Housing
2016-AT-0001
2016-AT-0001.pdf

We audited the U.S. Department of Housing and Urban Development’s (HUD) multifamily accelerated processing (MAP) program administered by its Office of Multifamily Production.  We initiated the audit under our annual audit plan.  Our objectives were to determine whether (1) HUD adequately reviewed and approved loans underwritten by MAP-approved lenders for Federal Housing Administration (FHA) insurance and (2) the 2016 MAP Guide was adequately revised to improve the review and approval process for MAP loans.

According to the Office of Multifamily Production, between 2002 and 2010, more than 8,600 loans were underwritten and closed by MAP-approved lenders.  We reviewed nine of the loans that had strong indicators of problems and found underwriting deficiencies in all nine loans.  The Background and Objectives section of the audit report includes a listing of the nine loans.  Our audit determined that HUD did not adequately review and approve nine loans underwritten by MAP-approved lenders for FHA insurance.  Specifically, HUD did not require lenders to adequately address a number of underwriting components.  As a result, HUD inappropriately approved nine loans submitted by six MAP lenders, which exposed the FHA insurance fund to unnecessary risk.  In addition, the 2016 MAP Guide was not sufficiently revised and could be further improved and modified to correct inconsistencies with certain underwriting components and the overall review and approval process.  By missing these underwriting components, HUD may have missed the opportunity to develop a stronger MAP Guide to reduce risk exposure.

We recommend that the Principal Deputy Assistant Secretary for Housing require the Office of Multifamily Housing Programs to revise its memorandum of understanding to ensure that loans are reviewed for compliance with MAP underwriting requirements.  In addition, we recommend that the Acting Deputy Assistant Secretary for Multifamily Housing Programs require the Office of Multifamily Production to (1) issue alternate guidance to update and clarify inconsistencies in the 2016 MAP Guide and (2) formalize a training program to ensure that new staff members are familiar with the Single Underwriter model.