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Report Fraud, Waste and Abuse
September 03, 2020
  • Public and Indian Housing
2020-LA-1005
Full Report
Accessible PDF

We audited Mid America Mortgage’s, dba 1st Tribal Lending’s, Section 184 Indian Home Loan Guarantee program based on a previous U.S. Department of Housing and Urban Development (HUD), Office of Inspector General, audit and corrective action verification of the Section 184 program, which determined that HUD lacked proper oversight of the program and lenders did not always underwrite loans in accordance with HUD’s requirements.  The lender was selected because it is the largest Section 184 program lender.  Our audit objective was to determine whether the lender underwrote Section 184 loans in accordance with HUD’s requirements.

The lender did not always follow HUD’s Section 184 program requirements.  Specifically, it did not always (1) underwrite Section 184 loans in accordance with program requirements and (2) follow HUD’s quality control requirements when reviewing loan files.  This condition occurred because the lender did not always exercise due diligence when underwriting loans and did not strictly follow HUD’s underwriting and quality control requirements.  As a result, there was an increased risk to the Section 184 program and HUD’s Loan Guarantee Fund.  There were 11 loans with material underwriting deficiencies and we recommend indemnification for 7 of these loans.  The seven loans had a total unpaid mortgage balance of $1.3 million with an estimated potential loss to HUD of $607,598.

We recommend that the Deputy Assistant Secretary for Native American Programs (1) request indemnification for 7 of the 11 loans  that had material underwriting deficiencies and had an unpaid mortgage balance of $1.3 million with an estimated potential loss to HUD of $607,598, (2) require the lender to develop and implement enhanced policies and procedures to ensure electronic signatures from borrowers are properly supported, and (3) require the lender to fully implement its quality control plan with respect to reverifications and provide HUD with periodic reports for 12 months to ensure that its quality control reviews are conducted in accordance with the requirements.

Recommendations

Public and Indian Housing

  •  
    Status
      Open
      Closed
    2020-LA-1005-001-A
    $607,598.00
    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 December 01, 2022

    Request indemnification for the 7 of the 11 loans that had material underwriting deficiencies (appendix D). The unpaid balance for these loans is $1.3 million and the estimated potential loss to HUD is $607,598.

  •  
    Status
      Open
      Closed
    2020-LA-1005-001-B
    Closed on December 05, 2022

    Require the lender to develop and implement enhanced policies and procedures to ensure electronic signatures from borrowers are properly supported.

  •  
    Status
      Open
      Closed
    2020-LA-1005-001-C
    Closed on February 02, 2024

    Require the lender to fully implement its quality control plan with respect to reverifications and provide HUD with periodic reports for 12 months to ensure that it conducts its quality control reviews in accordance with the requirements.