[Request for Decision as to Legality of Loans Under 12 U.S.C. 1701q]

A GAO decision was requested as to the legality of loans under the Housing for the Elderly and Handicapped Program for seven projects which had previously been approved by the Department of Housing and Urban Development (HUD). The question arose as a result of inquiries made by GAO to the HUD Chicago Regional Office concerning identity-of-interest questions about six of the seven projects and whether HUD financial responsiblity regulations had been followed in conditionally approving a loan to a sponsoring organization on the seventh project. Because the certification of improper payments under the loans in question would result in personal liability of HUD officials, GAO was asked about the propriety of proceeding with each of the projects and the legality of disbursements already made on one project. GAO was satisfied with the actions which HUD has proposed to cure deficiencies in the loans about which identity-of-interest questions were raised and does not intend to take exception to past or future disbursements under those loans, assuming that HUD carries through on its proposed actions. The ultimate authority concerning compliance with financial responsibility regulations rests with HUD headquarters. GAO will not substitute its judgment on such matters for that of agency officials. However, HUD should verify the financial responsiblity of the applicant about which serious questions were raised before the loan is finally approved.