Resolution Trust Corporation:

Affordable Housing Disposition Program Achieving Mixed Results

GGD-94-202: Published: Sep 28, 1994. Publicly Released: Sep 28, 1994.

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Pursuant to a legislative requirement, GAO reviewed the Resolution Trust Corporation's (RTC) Affordable Housing Disposition Program (AHDP), focusing on: (1) RTC progress in providing home ownership and rental opportunities to low- and moderate-income families; (2) RTC procedures for ensuring that property purchasers comply with income and occupancy requirements; (3) AHDP administrative costs; and (4) the status of RTC and the Federal Deposit Insurance Corporation's (FDIC) joint plan for continuing AHDP after RTC closes in December 1995.

GAO found that: (1) although RTC has made progress in providing home ownership and rental opportunities to low- and moderate-income families, the results of AHDP are mixed; (2) as of June 1994, RTC had sold about 63 percent of the single-family properties and 54 percent of the multifamily properties that it marketed through AHDP; (3) although multifamily property sales have increased over the last 2 years, complete data on the number of multifamily housing units occupied by income-eligible households are not available; (4) RTC has improved its procedures to ensure purchasers' compliance with AHDP income and occupancy requirements by requiring prospective single-family property buyers to provide evidence of their income and eligibility; (5) several problems have hampered RTC ability to ensure that multifamily property owners comply with the program's set-aside requirements, including the lack of time frames for compliance, insufficient enforcement actions, and the lack of assurances that all properties sold under AHDP have the required deed restrictions; (6) 113 multifamily properties were not monitored for compliance with set-aside requirements because RTC could not locate their deed restrictions; (7) RTC could not compare the cost differences between properties sold under AHDP and those sold outside the program because data were not available; (8) RTC reported that annual AHDP administrative costs averaged $11.8 million between 1991 and 1993; (9) in April 1994, RTC and FDIC developed a required plan for unifying their respective AHDP; and (10) RTC and FDIC are engaging in joint affordable housing sales involving 313 properties.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Effective October 1, 1995, RTC's Affordable Housing Disposition Program will be merged with FDIC's program. The task force has completed its best practices assessment and decided to adopt most of RTC's program policies and procedures. The Director of RTC's program, who is now concurrently the director of FDIC's program, said that GAO's report was used extensively in the best practices assessment.

    Recommendation: The Resolution Trust Corporation/Federal Deposit Insurance Corporation Transition Task Force should consider the weaknesses in the RTC compliance monitoring program for multifamily properties. If RTC and FDIC decide to use the RTC compliance monitoring program, certain aspects of it should be reviewed.

    Agency Affected: Resolution Trust Corporation/Federal Deposit Insurance Corporation Transition Task Force

  2. Status: Closed - Implemented

    Comments: As of August 1995, RTC had accounted for all but 10 of 644 land use restriction agreements. The director of the affordable housing disposition program assured GAO that they will continue to try and locate these 10 agreements as part of the continuing monitoring and compliance efforts. Since 10 is a very small percentage of the total number of agreements, GAO considers this recommendation fully implemented.

    Recommendation: The Resolution Trust Corporation's Deputy and Acting Chief Executive Officer should require the Director, AHDP, to ensure that all land use restriction agreements are accounted for, executed, and recorded.

    Agency Affected: Resolution Trust Corporation

  3. Status: Closed - Implemented

    Comments: RTC is using periodic site reviews by its staff to verify that monitoring agencies are following RTC policies to ensure that data on the occupancy status of deed restriction properties are accurate and provided on a timely basis. Monitoring agencies are required to submit semi-annual occupancy status reports to RTC. These reports are used by RTC to monitor compliance by property owners.

    Recommendation: The Resolution Trust Corporation's Deputy and Acting Chief Executive Officer should require the Director, AHDP, to ensure that complete information on the status of occupancy requirements is maintained.

    Agency Affected: Resolution Trust Corporation

  4. Status: Closed - Implemented

    Comments: RTC issued a policy directive providing guidance for establishing timeframes for multifamily properties sold with affordable housing land use restrictions to reach full compliance with agreed-upon set-aside unit requirements. It is RTC's new policy that owners should bring their properties into compliance within the shortest possible period of time. To do this, rental to a qualified tenant of the next available unit that becomes vacant is critical to ensuring full compliance and should be strictly enforced by the monitoring entity. Noncompliance fines and initiation of judicial enforcement actions are to be imposed when necessary. In setting timeframes, monitoring entities are to take into account the current number of qualified tenants in the property, the historic tenant turnover rate, property conditions, and planned renovations.

    Recommendation: The Resolution Trust Corporation's Deputy and Acting Chief Executive Officer should require the Director, AHDP, to establish specific time frames for each multifamily property to comply with occupancy requirements, although an exemption should be provided when the failure to comply is caused by the law that prohibits displacing existing tenants.

    Agency Affected: Resolution Trust Corporation

  5. Status: Closed - Not Implemented

    Comments: RTC's Vice President for Asset Management and Sales has made the determination that, while RTC acknowledges that stiffer penalties may help ensure compliance, revising the legal documents at this time would severely delay the sale of these assets. He therefore has decided that implementing this recommendation is not feasible or warranted.

    Recommendation: The Resolution Trust Corporation's Deputy and Acting Chief Executive Officer should require the Director, AHDP, to determine if stiffer penalties are warranted to encourage property owners to comply with occupancy requirements.

    Agency Affected: Resolution Trust Corporation

 

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