HUD's Payment of Distributive Shares From the Mutual Mortgage Insurance Fund

CED-81-44: Published: Feb 9, 1981. Publicly Released: Feb 9, 1981.

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The Mutual Mortgage Insurance Fund allows single-family homes to be purchased with small downpayments and long-term mortgages and insures lenders against loss from defaulted mortgage loans. The Department of Housing and Urban Development (HUD) is required to pay dividends (distributive shares) from the Fund to eligible mortgagors when their mortgages are paid in full. A review was performed of HUD efforts to pay distributive shares to mortgagors.

The procedures used by HUD for paying distributive shares were found to be ineffective. The portion of unpaid shares has substantially increased in recent years. According to HUD, the increase in unpaid shares is due largely to an inability to locate mortgagors after their mortgages are paid off. Many of the notices of shares due sent by HUD are returned as undeliverable because mortgagors have since moved. Since HUD has no forwarding addresses for these mortgagors, it is often unable to inform them of distributive shares due. GAO found that current procedures do not instruct mortgagees to inform mortgagors about distributive shares from the Fund. Consequently, most mortgagors contacted by GAO stated that they had been unaware of any refund due them until they received the HUD notification of a distributive share due.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of HUD should instruct the Director of Mortgage Insurance Accounting to request mortgagors' social security numbers on termination requests and use the IRS mail forwarding service as an alternate means of locating mortgagors when routine procedures fail.

    Agency Affected: Department of Housing and Urban Development

  2. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of HUD should instruct the Director of Mortage Insurance Accounting to develop a fact sheet explaining premium refunds for mortgagees to give to mortgagors both at the time of loan origination and at insurance termination.

    Agency Affected: Department of Housing and Urban Development

 

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