Better Cash Management Needed in HUD's Section 312 Housing Rehabilitation Loan Program

A review was made of the Department of Housing and Urban Development's (HUD) cash management procedures for administering the rehabilitation loan program authorized by section 312 of the Housing Act of 1964. The program provides direct low-interest, long-term loans to property owners in approved areas. Local public agencies (LPA's) are responsible for loan processing leading up to and following settlement with section 312 borrowers. Additionally, they request funds from HUD to arrive in time for loan settlements and maintain loan escrow accounts for section 312 borrowers. After loan settlements, LPA's help borrowers to get contractors to start work, make periodic and final inspections of the properties, pay contractors out of the escrow accounts, and close out loans.