Internal Controls:

Weaknesses in HUD's Single Family Housing Appraisal Program

RCED-87-165: Published: Sep 30, 1987. Publicly Released: Sep 30, 1987.

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GAO analyzed the Department of Housing and Urban Development's (HUD) efforts to correct weaknesses in its single-family housing appraisal program.

GAO found that HUD: (1) selected appraisals for review without a systematic, statistical sample; (2) did not meet the requirements of its present review program; and (3) used fee appraisers to perform field reviews of other appraisers' work, despite indications that this practice increased the potential for fraud, waste, and abuse. GAO also found that HUD field offices: (1) overrode random computer selections of appraisers and assigned them manually without adequate supervision or documentation; (2) did not provide regularly scheduled training for fee appraisers; and (3) failed to terminate appraisers who were performing unsatisfactorily.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: HUD has installed a new set of override codes which are sufficiently explanatory to trace the reason for the override. In addition, HUD headquarters is requiring that each override be justified.

    Recommendation: The Secretary of Housing and Urban Development should direct the Assistant Secretary for Housing to improve the documentation and supervision controls within the single-family housing appraisal program by: (1) developing override codes that are sufficiently explanatory to trace the validity of the override; and (2) using the special override runs available in the Computerized Home Underwriting Management System (CHUMS) to permit better supervision of the assignment process.

    Agency Affected: Department of Housing and Urban Development

  2. Status: Closed - Implemented

    Comments: HUD has implemented this recommendation by issuing a processing directive.

    Recommendation: The Secretary of Housing and Urban Development should direct the Assistant Secretary for Housing to alert the other field offices of the need to provide and document similar training and counseling.

    Agency Affected: Department of Housing and Urban Development

  3. Status: Closed - Implemented

    Comments: HUD will direct the three field offices accordingly and has issued a processing directive to institute, for each appraiser receiving three unsatisfactorily ratings, a short-term training and monitoring period and, if necessary, removal from the panel. Adequate documentation of all ratings, meetings, training sessions, phone calls, and disciplinary actions must be included in each appraiser's file.

    Recommendation: The Secretary of Housing and Urban Development should direct the Assistant Secretary for Housing to require that the three field offices GAO visited provide training to appraisers who receive unsatisfactory ratings, and document in the appraisers' personnel files that such training and counseling has taken place.

    Agency Affected: Department of Housing and Urban Development

  4. Status: Closed - Implemented

    Comments: HUD has instructed its field offices to set up panels to review applicant qualifications and has developed criteria for use by the panel.

    Recommendation: The Secretary of Housing and Urban Development should direct the Assistant Secretary for Housing to require field offices to use panels to select the most qualified appraisers for fee panels.

    Agency Affected: Department of Housing and Urban Development

  5. Status: Closed - Implemented

    Comments: HUD issued a directive increasing the fee for interior reviews and reducing the goal from 50 to 33 percent of the field reviews that should include a review of the house's interior. Because of a large work load and other restraints, this goal is more realistic. HUD has better defined its rating criteria, quantified the reviewers' ratings on a scale of 1 to 5, and required more documentation.

    Recommendation: The Secretary of Housing and Urban Development should direct the Assistant Secretary for Housing to take action to improve the manner by which field reviews are performed, rated, and documented, especially by increasing the number of field reviews with interior reviews, implementing general criteria for use by the reviewer in determining the appraisal's rating, and requiring more documentation of the rationale or reason for the rating on the field review form.

    Agency Affected: Department of Housing and Urban Development

  6. Status: Closed - Implemented

    Comments: The use of fee field reviewers, who do not also do appraisals for HUD, should help preclude the need for a review of field reviewer's appraisals. HUD now requires that field reviewer's work be reviewed by HUD staff and each reviewer receive a rating.

    Recommendation: The Secretary of Housing and Urban Development should direct the Assistant Secretary for Housing to take action to stress to the field offices the importance of using required checks when fee appraisers are doing field reviews. These checks include having HUD staff: (1) review appraisals done by the field reviewer; and (2) examine reviews done by the field reviewer.

    Agency Affected: Department of Housing and Urban Development

  7. Status: Closed - Implemented

    Comments: HUD issued a processing directive emphasizing the need to have HUD staff perform the field reviews. HUD plans to set up panels of fee field reviewers, who will not do appraisals for HUD, to do field reviews when the staff is not able.

    Recommendation: The Secretary of Housing and Urban Development should direct the Assistant Secretary for Housing to take action to intensify efforts to use HUD staff to perform field reviews, and allow fee appraisers to be used for this purpose only on an exception basis, especially in those offices where the statistical plan reduces the required number of reviews.

    Agency Affected: Department of Housing and Urban Development

  8. Status: Closed - Implemented

    Comments: A sampling plan has been installed in all HUD offices.

    Recommendation: The Secretary of Housing and Urban Development should direct the Assistant Secretary for Housing to develop, at field offices where it is cost-beneficial, a systematic plan with a sound methodological basis, such as statistical sampling, to produce accurate estimates of the appraisal quality at each of its field offices. In conjunction with the development and implementation of this plan, the Assistant Secretary should ensure that each field office will continue to identify the poor performers and, if necessary in the large offices, use some of the reviews no longer needed for general oversight to monitor their performance.

    Agency Affected: Department of Housing and Urban Development

  9. Status: Closed - Implemented

    Comments: Additional training on the CHUMS system for assignment clerks has been provided.

    Recommendation: The Secretary of Housing and Urban Development should direct the Assistant Secretary for Housing to ensure that field office assignment clerks are adequately trained on CHUMS and on the process for overriding CHUMS appraiser assignments.

    Agency Affected: Department of Housing and Urban Development

 

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