HUD Should Make Immediate Changes in Accounting for Secretary-Held Multifamily Mortgages

FGMSD-80-43: Published: May 16, 1980. Publicly Released: May 16, 1980.

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The Department of Housing and Urban Development (HUD) holds over 2,000 multifamily mortgages valued at about $3.7 billion. These Secretary-held mortgages were either returned from commercial lenders after mortgagors defaulted on their insured mortgages or resulted from HUD selling property it had previously acquired.

As of September 30, 1979, HUD reported that $500 million in payments on multifamily mortgages was delinquent. Numerous problems have contributed to the high amount of delinquency. These included several accounting system weaknesses that prevented adequate information from being available to properly service individual mortgages and to promptly and accurately pay property taxes. Also, incentives were lacking to encourage mortgagors to make payments under revised payment plans (workout agreements) to prevent foreclosure.

Recommendations for Executive Action

  1. Status:

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of HUD should direct that the Department's accounting and servicing functions be changed so that an interim billing system is established for newly assigned mortgages.

    Agency Affected: Department of Housing and Urban Development

  2. Status:

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of HUD should direct that the Department's accounting and servicing functions be changed so that servicing personnel can receive information on mortgagors' payment status under the terms of workout agreements.

    Agency Affected: Department of Housing and Urban Development

  3. Status:

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of HUD should direct that the Department's accounting and servicing functions be changed so that late charges are assessed on payments overdue under the mortgages or the workout agreements.

    Agency Affected: Department of Housing and Urban Development

  4. Status:

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of HUD should direct that the Department's accounting and servicing functions be changed so that inventories of the responsible headquarters' offices and the field offices are reconciled periodically.

    Agency Affected: Department of Housing and Urban Development

  5. Status:

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of HUD should direct that the Department's accounting and servicing functions be changed so that records of the taxing authorities and the Department are reconciled periodically.

    Agency Affected: Department of Housing and Urban Development

  6. Status:

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of HUD should direct that the Department's accounting and servicing functions be changed so that workout agreements that provide for a specific payment amount be established within 90 days after receiving a defaulted mortgage.

    Agency Affected: Department of Housing and Urban Development

  7. Status:

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of HUD should direct that the Department's accounting and servicing functions be changed so that servicing personnel be further trained in financial statement analysis.

    Agency Affected: Department of Housing and Urban Development

  8. Status:

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of HUD should direct that the Department's accounting and servicing functions be changed so that field offices are required to obtain adequate financial statements when they are not submitted promptly or fail to meet Department regulations.

    Agency Affected: Department of Housing and Urban Development

  9. Status:

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of HUD should direct that the Department's accounting and servicing functions be changed so that aggressive action will be taken to obtain repayment of project funds that have been diverted.

    Agency Affected: Department of Housing and Urban Development

  10. Status:

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of HUD should direct that the Department's accounting and servicing functions be changed so that records of the taxing authorities and the Department are reconciled periodically.

    Agency Affected: Department of Housing and Urban Development

 

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