The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General audited HUD’s rulemaking process for its single family note sales program.  This is the second in a series of audits on the note sales program.  The previous audit, 2017-KC-0006, reported that HUD did not conduct rulemaking or develop formal procedures for its single-family note sales program.  This audit examines a different aspect of the program.

HUD generally ensured that purchasers followed the requirements outlined in the conveyance, assumption, and assignment contracts.  However, the requirements in the purchase agreements need improvement.  If a purchaser chose not to comply with its purchase agreement, HUD lacked assurance that the purchaser would offer homeowners foreclosure avoidance, loan modification options, and other program requirements.
 
We recommend that the Acting Deputy Assistant Secretary of Finance and Budget (1) update the terms in the purchase agreement to ensure that the agreement defines “extenuating circumstance” in reference to foreclosure avoidance, (2) establish how long stabilization outcomes may continue to be reported as “planned,” and (3) establish financial or other penalties to hold purchasers accountable in instances of nonreporting and noncompliance.