The U.S. Department of Housing and Urban Development (HUD) audited PNC Mortgage (PNC), a Federal Housing Administration (FHA)-approved nonsupervised lender and servicer. We selected PNC for audit based on a citizen’s complaint regarding National City Mortgage Corporation (National City). PNC acquired National City in December 2008. Therefore, the report will be addressed to the current entity. Our objective was to determine whether PNC actively and properly implemented the U.S. Department of Housing and Urban Development’s (HUD) Loss Mitigation Program (program) for FHA-insured mortgages; specifically, whether it (1) prevented eligible borrowers from participating in the program and (2) inappropriately received loss mitigation incentive payments from HUD. The audit was part of the activities in our fiscal year 2010 annual audit plan.

PNC complied with HUD’s requirements for loss mitigation. It appropriately determined borrowers’ eligibility and received loss mitigation incentive payments from HUD for only the borrowers that participated in the program. Therefore, the complainant’s allegations that National City prevented eligible borrowers from participating in the program and received incentive payments from HUD for loss mitigation services that it did not provide were unsubstantiated. Since we did not identify any instances of noncompliance, this audit report contains no recommendations.