Analysis of Multifamily Assigned Mortgages
CED-80-43: Published: Jan 16, 1980. Publicly Released: Jan 22, 1980.
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In response to a Senate request, GAO obtained information on the amount of money and length of time involved in delinquencies on multifamily mortgages held by the Department of Housing and Urban Development (HUD). Mortgages under workout arrangements designed to bring them current and mortgages in the foreclosure process were also considered.
Past experience has shown that at the time of mortgage assignment, action to either expeditiously foreclose on a mortgage or vigorous monitor its reinstatement could save millions of dollars for the Federal Government and protect the interests of tenants. Yet, the GAO analysis showed that seriously delinquent mortgages were neither in foreclosure nor under workout arrangements, a HUD method for reinstating delinquent mortgages. Under workout arrangements mortgagers agree in writing to temporarily make partial payments while working toward permanent solutions to their financial problems. Although HUD stated that it tried to have all delinquent mortgages under the terms of a workout arrangement with 6 months of assignment, many seriously delinquent loans were not under these arrangements. HUD foreclosures took over 2.5 years to accomplish and were applied inconsistently. The extended proceedings resulted in increased losses to the Federal Government and hardships on tenants. Projects often deteriorated after mortgagers became aware of a potential foreclosure action. Project owners could claim income tax deductions for the accrual of unpaid interest and depreciation expenses while they were delinquent and while foreclosure was in process. This acted as a monetary incentive for delaying foreclosure.
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