Pursuant to a legislative mandate, GAO reviewed the risk-sharing demonstration programs established under section 542 of the Housing and Community Development Act of 1992, focusing on: (1) how well the programs' goals are being met; (2) the benefits for participating financial institutions and the Department of Housing and Urban Development (HUD); and (3) opportunities for improving the programs and HUD's administration of them.
Recommendations for Executive Action
|Department of Housing and Urban Development||1. The Secretary of Housing and Urban Development should direct the Commissioner, Federal Housing Administration, to explore the feasibility of amending HUD's current risk-sharing agreements, to: (1) allow the use of reinsurance with 18-year balloon mortgages as is currently permitted in an agreement with Fannie Mae; and (2) authorize the use of reinsurance with loan pools.|
|Department of Housing and Urban Development||2. To ensure that risk-sharing demonstration programs' managers have consistent and reliable data to meet their statutory and regulatory obligations, the Secretary of Housing and Urban Development should take steps to correct current flaws in the information systems supporting the programs.|
|Department of Housing and Urban Development||3. In correcting the flaws in the data system supporting the credit enhancement program, the Secretary of Housing and Urban Development should direct the system's designers and the program's managers to examine the near-term suitability of using spreadsheets and databases commonly contained in suite software within the context of the long-term data needs of a growing universe of projects, giving careful consideration to the requirements of all users of the system.|
|Department of Housing and Urban Development||4. The Secretary of Housing and Urban Development should give priority to implementing a comprehensive monitoring system to ensure that HUD's risk-sharing partners are complying with the demonstration programs' procedures, regulations or risk-sharing agreements, including the requirements for timely reporting on the status of insured loans.|