HUD Management: FHA's Multifamily Loan Loss Reserves and Default Prevention Efforts
RCED/AIMD-95-100
Published: Jun 05, 1995. Publicly Released: Jun 05, 1995.
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Highlights
Pursuant to a legislative requirement, GAO reviewed the adequacy of the loan loss reserves covering the Federal Housing Administration's (FHA) multifamily loan portfolio, focusing on the: (1) methodology FHA used to establish loan loss reserves for its fiscal year (FY) 1993 portfolio; (2) benefit of creating a new insurance fund for all new multifamily housing insurance commitments; and (3) Department of Housing and Urban Development's (HUD) initiatives for preventing future defaults on FHA multifamily housing loans.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Housing and Urban Development | The Secretary of Housing and Urban Development should direct the Deputy Assistant Secretary for Multifamily Housing to establish a process for tracking the performance of its multifamily projects to obtain the data needed to test the accuracy of its assumptions about default. |
In response to GAO's recommendation, each year HUD conducts an analysis of recent loan defaults to test the validity of its loan loss reserve assumptions about defaults.
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| Department of Housing and Urban Development | The Secretary of Housing and Urban Development should direct the Deputy Assistant Secretary for Multifamily Housing to develop specific plans for incorporating capabilities into its data systems that will allow it to gather data through electronic media on the financial and physical condition and on the management of the multifamily projects in its portfolio, and track the progress of projects in implementing actions to prevent default. |
HUD has taken actions to incorporate capabilities in its data systems that allow it to gather data through electronic media on the condition of multifamily properties in its portfolio. More specifically, HUD's Real Estate Assessment Center (REAC) gathers data through electronic media on both the physical and financial condition of multifamily properties. REAC then assesses the data and makes the results available to HUD field offices and the HUD Enforcement Center. These results are used to identify and address problems at properties that do not provide decent, safe and sanitary housing. In addition, HUD's Office of Housing has established a Real Estate Management System that includes elements for tracking HUD field offices' efforts to address problems at multifamily properties.
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Budgetary reservesFederal aid for housingFinancial institutionsGovernment guaranteed loansLoan defaultsLow income housingMortgage loansMortgage programsMortgage protection insuranceHospitals