Problems Persist With HUD's 203(k) Home Rehabilitation Mortgage Insurance Program

GAO-01-1124T: Published: Sep 10, 2001. Publicly Released: Sep 10, 2001.

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Stanley J. Czerwinski
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The Department of Housing and Urban Development's (HUD) 203(K) Home Rehabilitation Mortgage Insurance Program helps promote the rehabilitation and repair of housing by combining, in one insured mortgage, the funds needed to purchase and rehabilitate a single-family home. The loans are made by banks and other private lenders from their own funds and are insured by HUD's Federal Housing Administration. The program's history of waste, fraud, and abuse prompted a GAO review of HUD program oversight about two years ago. The 203(K) program is inherently more risky than HUD's principal single-family loan insurance program because its rehabilitation component makes it more complex and susceptible to misuse. HUD's Inspector General and others noted such risks in 1997 and 1998 reports on the department's management of the program. HUD was not adequately targeting 203(K) loans and lenders for review, properly training and overseeing consultants/inspectors, and monitoring nonprofit organization's participation in the program.

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