Resolution Trust Corporation:

Affordable Multifamily Housing Program Has Improved but More Can Be Done

GGD-92-137: Published: Sep 29, 1992. Publicly Released: Sep 29, 1992.

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GAO assessed the Resolution Trust Corporation's (RTC) progress in: (1) preserving affordable rental properties; (2) developing a national program and strategy for selling multifamily properties, including assisting nonprofit organizations and public agencies with special financing and price discounts; and (3) complying with statutory provisions pertaining to bulk and individual property sales.

GAO found that: (1) RTC has not developed a well-defined, integrated multifamily program, and has had limited success in preserving affordable housing for low-income families; (2) RTC field offices developed their own sales procedures and marketing processes; (3) RTC did not give its offices adequate guidance on comparing similar bids and, as a result, RTC completed sales that resulted in lost affordable housing units; (4) RTC was slow to implement the special financing and pricing options authorized by Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) for nonprofit organizations and public agencies; (5) in May and June 1992 RTC published various rules, policies, and directives on marketing and sales of property under the affordable housing program; and (6) RTC bulk sale practices remain inconsistent with the applicable statute because they inhibit or prevent qualified multifamily purchasers from buying an individual property if RTC markets it as part of a bulk package.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: RTC has revised its program compliance review procedures as well as its SAMDA contractor oversight program to more carefully focus on areas where GAO identified noncompliance with RTC policies. Since the issuance of the report, program compliance reviews scheduled for 1992 have been completed and corrective action plans were developed. Follow-up reviews are being held to ensure that these plans are properly implemented. Internal control reviews have been held in four offices in 1993, and are scheduled for the remaining two offices September and October. Also, RTC issued a new manual, 10150.16 entitled Compliance Monitoring Manual for State Agencies, on February 1, 1993. RTC is entering into memoranda of understanding with state agencies to serve as the RTC compliance monitoring agent for affordable housing rental properties sold with deed restrictions.

    Recommendation: The Chief Executive Officer, RTC, should implement corporatewide procedures and systems to monitor and oversee the implementation of the program directives.

    Agency Affected: Resolution Trust Corporation

  2. Status: Closed - Implemented

    Comments: RTC's position, based on a legal opinion from its Office of the General Counsel, is still that the affordable housing disposition program rules currently conform with section 21A(c) of FHLBA. Therefore, it does not plan to make any revisions to the program rules. Nevertheless, in practice, RTC has shifted its preference from bulk sales to individual sales. Since its Direct Sales Program was initiated, nearly all multifamily housing properties are offered individually before being placed in a bulk sale.

    Recommendation: The Chief Executive Officer, RTC, should amend the Affordable Housing Disposition Program rules to conform with the individual sales preference provision contained in section 21A(c) of the FHLBA.

    Agency Affected: Resolution Trust Corporation

  3. Status: Closed - Not Implemented

    Comments: RTC has not conducted a multifamily bulk sale in over a year. It plans to offer all available multifamily properties on an individual basis through its Direct Sales Program. Since it does not plan to use bulk sales in the future, it does not intend to analyze bulk and individual sales methods to determine their effect on preserving affordable housing and on sales prices for properties in the program. While GAO continues to see value in making such an analysis, it is clear that RTC does not intend to analyze its sales approaches to determine which preserves more affordable housing units.

    Recommendation: The Chief Executive Officer, RTC, should analyze bulk and individual sales methods to determine their effect on preserving affordable housing and on sales prices for properties in the program.

    Agency Affected: Resolution Trust Corporation

  4. Status: Closed - Not Implemented

    Comments: The recommended analysis was not done. Still, in January 1993, the Director of the Affordable Housing Disposition Program Director requested RTC's Director of Governmental Relations to develop an amendment for the RTC refunding bill to address RTC's policy on bulk sales. However, the bulk sales amendment was not developed because RTC's Division of Legal Services determined that an amendment to FHLBA was not necessary. Further, as a matter of policy, RTC had shifted its preference from bulk sales to individual sales through its Direct Sales Program for Public Agencies and Nonprofit Organizations. Over the last year, virtually all multifamily sales have been individual offerings through this program.

    Recommendation: The Chief Executive Officer, RTC, should, after conducting an appropriate analysis and empirical data show that affordable housing can best be preserved through bulk sales, seek an appropriate amendment to this provision of the law.

    Agency Affected: Resolution Trust Corporation

 

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