Beginning in 2021, the U.S. Department of Housing and Urban Development (HUD) Office of Inspector General (OIG) conducted several audits to assess HUD’s anti-fraud efforts and to develop inventories of fraud risks for several of its programs.  Our previous work found that HUD’s fraud risk management program was in its early stages of development and we recommended that HUD perform program-specific fraud risk assessments and incorporate these assessments into an agency-wide plan to further advance its program.  To continue assisting HUD in improving its anti-fraud efforts, we conducted this work to identify potential fraud risks and schemes that could negatively impact HUD’s Single Family Housing program.  Our objective was to assist HUD by developing an inventory of fraud risks for its Single Family Housing program.
 
As part of a larger effort by the HUD Office of Housing Operational Risk Division that included developing fraud risk inventories for all components of the Office of Housing, HUD created a fraud risk inventory for the Single Family Housing program that identified 28 fraud risks or schemes and covered many aspects of the program including appraisal, application, origination, servicing, invoices, and claims.  We identified five overall fraud risk factors that increase the chance of fraud occurring in the program by increasing the incentive, opportunity, and likelihood for an individual considering committing fraud.  We used these fraud risk factors, along with the results of brainstorming sessions, interviews, and reviews of audit reports, investigations, and press releases from HUD OIG and other agencies, to develop an inventory of 64 potential fraud schemes that HUD had not previously identified.  These schemes could be used to defraud the Single Family Housing program and undermine its integrity, resulting in an increased risk to the FHA insurance fund, borrowers, and lenders.  

We recommend that the HUD Office of Single Family Housing (1) use the OIG’s fraud risk inventory included in this report to enhance its Single Family program-specific fraud risk inventory, (2) include lenders and servicers in the fraud risk identification process and communicate the risks and schemes identified for the Single Family Housing program to relevant stakeholders, and (3) incorporate data and system enhancements into its plans to improve HUD’s ability to monitor and respond to fraud risks in the Single Family Housing program.