HUD Management:

Greater Oversight Needed of FHA's Nursing Home Insurance Program

RCED-95-214: Published: Aug 25, 1995. Publicly Released: Aug 25, 1995.

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Pursuant to a legislative requirement, GAO evaluated the Federal Housing Administration's (FHA) nursing home, retirement service center, and hospital insurance programs, as well as the Department of Housing And Urban Development's (HUD) ability to manage these programs.

GAO found that: (1) the nursing home program has not been targeted to serve specific populations or communities, and HUD does not collect or analyze information on whom the program is serving; (2) FHA has not done any complete assessments of the financial performance of the nursing home and retirement service center programs and it is unlikely that HUD will be able to effectively manage the nursing home and retirement service center programs in the future; (3) it is unclear whether HUD consolidation of its multifamily underwriting and asset management responsibilities will be implemented; and (4) HUD has implemented legislative changes that authorize FHA mortgage insurance for assisted living facilities, which may result in the nursing home program's growth and in potentially riskier loans.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: HUD disagreed with the recommendation, and will not implement it for several reasons. HUD stated that collecting data on the characteristics of patients, locations, and borrowers for future projects would be overly burdensome on the private sector and HUD. In addition, HUD indicated that because it did not have a legislative mandate to target the program to certain areas, individuals, or borrowers, it should not gather the data that GAO recommended. Consequently, HUD will continue to be unable to assess the extent to which the nursing home program serves populations and geographic areas that are not adequately served by the private sector. Given its unequivocal disagreement on this issue and its relative weight given the other recommendations in this report that GAO will continue to monitor, GAO is closing this recommendation.

    Recommendation: To better measure the outcomes of the nursing home program, the Secretary of Housing and Urban Development should direct the Deputy Assistant Secretary for Multifamily Housing Programs to collect data on the characteristics of patients, locations, and borrowers for all future projects.

    Agency Affected: Department of Housing and Urban Development

  2. Status: Closed - Implemented

    Comments: While HUD established a group to carry out post-endorsement reviews of nursing home loans, this effort is no longer ongoing. It is not clear when it will be reestablished. Furthermore, the focus of these reviews was on the performance of insured assisted living facilities, not on the financial performance of the overall Section 232 program.

    Recommendation: To better measure the outcomes of the nursing home program, the Secretary of Housing and Urban Development should direct the Deputy Assistant Secretary for Multifamily Housing Programs to use the receipts and expenses data now tracked by HUD's data systems to monitor the program's financial performance.

    Agency Affected: Department of Housing and Urban Development

  3. Status: Closed - Implemented

    Comments: HUD contracted with Price Waterhouse to reformulate credit subsidy estimates for the FHA nursing home program. Price Waterhouse's study was based on an analysis of the historical performance of the Section 232 program. Price Waterhouse then used the historical data to develop a formula to estimate future program performance and credit subsidy estimates. HUD plans to include these new credit subsidy estimates for the nursing home program in its fiscal year 2000 budget estimates.

    Recommendation: To better measure the outcomes of the nursing home program, the Secretary of Housing and Urban Development should direct the Deputy Assistant Secretary for Multifamily Housing Programs to reformulate credit subsidy estimates for nursing home loans on the basis of data that are up-to-date, are accurate, and, to the extent possible, take into account differences between the potential default risk of loans that are to be insured and loans that have been insured in the past.

    Agency Affected: Department of Housing and Urban Development

  4. Status: Closed - Implemented

    Comments: The Department has established procedures to monitor the performance of the assisted living facilities and board and care homes in its nursing home portfolio. As a result of increased program monitoring, the Department issued new program underwriting guidance.

    Recommendation: To better measure the outcomes of the nursing home program, the Secretary of Housing and Urban Development should direct the Deputy Assistant Secretary for Multifamily Housing Programs to establish procedures to carefully monitor the financial performance of assisted living facility loans in the nursing home portfolio in a timely manner so that prompt action may be taken to prevent further loan defaults.

    Agency Affected: Department of Housing and Urban Development

 

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