Develop and implement a plan to review the reserve for replacement accounts for all converted properties from the date on which the account was established to the date of the review. Based on the reviews completed, HUD should take appropriate actions to ensure that reserve for replacement accounts are appropriately funded or determine whether overfunded accounts should have the deposits suspended for a specified period.
Publication Report
2025-CH-0001 | December 18, 2024
HUD’s Office of Multifamily Needs To Improve Its Oversight of PBRA and FHA-Insured PBV Properties Converted Under RAD
HUD’s Office of Housing contracts with performance-based contract administrators to administer the housing assistance payments (HAP) contract with owners. Through RAD, HUD oversees the HAP contracts for converted properties and monitors owners for… moreRelated Recommendations
Housing
- Status2025-CH-0001-001-AOpenClosed
Review the non-life-threatening health and safety and other deficiencies observed by the audit team and ensure that property owners and agents make the necessary corrections to the deficiencies as appropriate.
- Status2025-CH-0001-001-BOpenClosedPriorityPriority
We believe these open recommendations, if implemented, will have the greatest impact on helping HUD achieve its mission to create strong, sustainable, inclusive communities and quality affordable homes for all.
Determine the appropriate timeframe for when initial MORs should be completed for all properties that convert under RAD and issue updated guidance that includes a system to track the timeliness of initial MORs.
Status
Given current resource constraints, HUD will create guidance based on risk-based Management and Occupancy Review (MOR) parameters to ensure that field staff and leadership perform the initial MOR for PBRA RAD-converted properties. This guidance will specify which assessments can be done on-site or remotely (such as desk reviews). Furthermore, the guidance will require that the existing MOR tracking tools (e.g., PowerApps) be used to monitor planning for the MORs and progress throughout, until final closing of the review. As of July 2025, HUD has completed 233 MORs for the 834 RAD-converted properties. The tool allows HUD staff to filter by the type of conversion (e.g. RAD PIH, RAD PRAC, etc.) as well as other risk indicators (e.g., troubled status), location and servicer (e.g. Account Executive, Senior Account Executive, Resolution Specialist). OIG has concurred with HUD's corrective action plan that it will create guidance to allow for a risk-based approach for completing MORs, which HUD anticipates completing by September 30, 2025.
Analysis
To implement this recommendation, HUD needs to provide evidence that it has updated guidance with appropriate timeframe for conducting MORs and a system to track the timeliness of initial MORs. Failure to determine the timing of the initial MORs could delay HUD's performance of them, which may result in property owners' untimely corrective actions, and thus potentially impact the health and safety of families.
The implementation of this recommendation has the potential to directly impact the health and safety of families.
- Status2025-CH-0001-001-COpenClosedPriorityPriority
We believe these open recommendations, if implemented, will have the greatest impact on helping HUD achieve its mission to create strong, sustainable, inclusive communities and quality affordable homes for all.
Complete the initial MORs for RAD properties that have not had an initial MOR.
Status
Given current resource constraints, HUD will create guidance based on risk-based Management and Occupancy Review (MOR) parameters to ensure that field staff and leadership perform the initial MOR for PBRA RAD-converted properties. This guidance will specify which assessments can be done on-site or remotely (such as desk reviews). The guidance will outline the timing requirements for when the initial MOR should be completed. To date, HUD staff have completed 233 MORs for the 834 RAD-converted properties. HUD anticipates completing the initial MORs for the remaining 501 properties by the end of 2027. HUD HQ and field staff will use the Power BI MOR tool to track the MOR through the stages: scheduling, review, issuance of report and finally the closing of the report. As of July 2025, OIG has concurred with HUD's corrective action plan that HUD will begin completing the initial MORs using a risk-based approach. The target completion date for HUD to demonstrate it is taking corrective action is set for December 31, 2025.
Analysis
Completing initial MORs would assist HUD in holding property owners accountable for maintaining the conditions of their properties and sufficient reserve for replacement accounts balances, which could impact property owners' ability to make needed capital repairs.
The recommended corrective action has the potential to directly impact the health and safety of families.
- Status2025-CH-0001-001-DOpenClosedPriorityPriority
We believe these open recommendations, if implemented, will have the greatest impact on helping HUD achieve its mission to create strong, sustainable, inclusive communities and quality affordable homes for all.
Develop and implement a plan to determine how to implement the risk-based approach to review the RAD properties that have not had subsequent MORs in more than 3 years and to require periodic MORs going forward.
Status
Given the current resource constraints, HUD will create guidance based on risk-based Management and Occupancy Review (MOR) parameters to ensure that field staff and leadership perform MORs using a risk-based model for PBRA RAD-converted properties. This guidance will specify which assessments can be done on-site or remotely (such as desk reviews) and the timing requirements for when ongoing MORs should be scheduled once the initial MOR is completed. As of July 2025, 641 MORs need to be scheduled for the Office of Asset Management's portfolio of 834 RAD-converted properties. Of those, 85 properties are managed by Performance-Based Contract Administrators (PBCA). Depending on risk indicators for each property, MORs will be scheduled accordingly. HUD reported that its staff resources are limited in comparison to the PBCAs and will therefore take a risk-based approach for prioritizing the MORs that HUD staff must complete. The Office of Asset Management will develop a plan to address the backlog of RAD-converted MORs using the current risk factors which include the physical condition, last MOR score, financial health of the property and other indicators. The target completion date is December 31, 2025.
Analysis
Developing a plan to implement the risk-based approach would establish the criteria for identifying properties that are at a higher risk of noncompliance.
The recommended corrective action would help HUD to monitor property owners' compliance with its requirements and thus, potentially protect families from living in unsafe units.
- Status2025-CH-0001-001-EOpenClosed
Provide training to field staff members to ensure that they have the skills necessary to complete MORs of converted properties.
- Status2025-CH-0001-001-FOpenClosed
Review the reserve for replacement account balances for the 13 properties (11 underfunded and 2 overfunded) to determine whether the balances are maintained in accordance with the applicable HUD requirements and executed HUD business documents and require owners to fully fund any underfunded reserves and determine whether any overfunded accounts should have the deposits suspended for a specified period.
- Status2025-CH-0001-001-GOpenClosed
Review the HUD business documents, such as the RAD conversion commitment, HAP contract, and regulatory agreement, for the four properties that did not contain consistent reserve for replacement information and update the documents to be consistent as appropriate.
- Status2025-CH-0001-001-HOpenClosed
Issue guidance to RAD property owners clarifying that the owner is responsible to follow both the HUD business documents and the property’s business documents and that the most restrictive document indicates the amount and timing of the annual deposits into the reserve for replacement account.
- Status2025-CH-0001-001-IOpenClosed
Develop and implement a process to ensure that the reserve for replacement requirements in HUD’s business documents are consistent for all converted properties.
- Status2025-CH-0001-002-AOpenClosed
Implement adequate procedures and controls to ensure that servicing lenders comply with HUD time requirements in scheduling initial inspections of FHA-insured RAD PBV properties.
- Status2025-CH-0001-002-BOpenClosedPriorityPriority
We believe these open recommendations, if implemented, will have the greatest impact on helping HUD achieve its mission to create strong, sustainable, inclusive communities and quality affordable homes for all.
Determine an appropriate timeframe in which non-FHA-insured PBRA properties converted under RAD should be initially inspected, work with REAC to ensure that inspections are ordered and completed within that timeframe, and update HUD’s publicly available and internal guidance to ensure consistent messaging in accordance with HUD’s determination.
Status
As of July 2025, Multifamily Housing planned to develop and implement adequate policies, procedures, and controls to ensure non-FHA insured PBRA properties under RAD are inspected within 90 days after the original date of the HAP contract, unless the property has been approved for inspection delay during major rehabilitation, then within 90 days after the end of the approved inspection delay. Further, Multifamily Housing will provide appropriate updated guidance to both internal and external partners relative to non-FHA-insured PBRA properties converted under RAD. The target completion date is September 30, 2025.
Analysis
Determining the appropriate timeframe for initial inspections would result in the timely identification and correction of life-threatening and non-life-threatening deficiencies.
The recommended corrective action has the potential to directly impact the health and safety of families.