Defaulted Title I Home Improvement Loans--Highly Vulnerable to Fraud, Waste, and Abuse
AFMD-82-14
Published: Dec 07, 1981. Publicly Released: Feb 01, 1982.
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Highlights
GAO reviewed the Department of Housing and Urban Development's (HUD) loan servicing and accounting for defaulted title I Home Improvement Loan Program loans. Under the title I program, HUD guarantees loans made by private lenders for home improvement. Defaulted loans are acquired by HUD when borrowers fail to make their loan payments and lenders return the loans to HUD for payment of an insurance claim.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Housing and Urban Development | The Secretary of HUD should direct the Assistant Secretary for Housing and/or Administration to ensure, before writing loans off as uncollectible, that locator services have been used to find defaulting borrowers. |
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
|
| Department of Housing and Urban Development | The Secretary of HUD should direct the Assistant Secretary for Housing and/or Administration to make full legal use of credit bureau reporting on loans in current inventory, should pending legislation be enacted. |
FIA assignment will provide for verification.
|
| Department of Housing and Urban Development | The Secretary of HUD should direct the Assistant Secretary for Housing and/or Administration to direct home improvement lenders to report all title I loans and their status to credit bureaus and require lenders to obtain credit reports on loan applicants before making loans. |
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
|
| Department of Housing and Urban Development | The Secretary of HUD should direct the Assistant Secretary for Housing and/or Administration to improve internal controls over receipts and accounting records by implementing controls already required in HUD procedures. Also, complete the current inventory reconciliation and thereafter reconcile periodically. |
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
|
| Department of Housing and Urban Development | The Secretary of HUD should direct the Assistant Secretary for Housing to establish a system to control and track the expiration dates of liens obtained by lenders or the Department of Justice. |
FIA assignment will provide for verification.
|
| Department of Housing and Urban Development | The Secretary of HUD should direct the Assistant Secretary for Housing to determine a claim amount, based on such factors as legal cost involved, over which lenders will be required to obtain judgments and/or place liens on improved property before HUD pays an insurance claim. |
To address the problems resulting in this recommendation, HUD reduced the ceiling on unsecured signature loans from $7,500 to $2,500. GAO feels that this action will reduce the volume of unsecured loans being returned to HUD in default.
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| Department of Housing and Urban Development | The Secretary of HUD should direct the Assistant Secretary for Housing to require that, when financially feasible, defaulted loans be referred to the Department of Justice for collection action before the loans are written off as uncollectible. |
FIA assignment will provide verification.
|
| Department of Housing and Urban Development | The Secretary of HUD should direct the Assistant Secretary for Housing to establish and enforce foreclosure policies on secured loans in accordance with the Federal Claims Collection Standards. |
FIA assignment will provide verification.
|
| Department of Housing and Urban Development | The Secretary of HUD should direct the Assistant Secretary for Housing and/or Administration to initiate systematic servicing of defaulted home improvement loans immediately upon receiving insurance claims from the lenders. |
FIA assignment will provide verification.
|
| Department of Housing and Urban Development | The Secretary of HUD should charge defaulting borrowers the maximum allowable interest rate and amend HUD regulations in order to apply payments received in accordance with the U.S. Rule. |
FIA assignment will provide verification.
|
| Department of Housing and Urban Development | The Secretary of HUD should increase the accuracy of financial reporting by computing and reporting interest on defaulted home improvement loans under accrual accounting methods. |
FIA assignment will provide verification.
|
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Topics
Financial management systemsGovernment guaranteed loansHomeowners loansInternal controlsLoan accounting systemsLoan defaultsLoan interest ratesProperty improvement loansProposed legislationBreach of contract