Develop and implement policies and procedures to ensure that HUD Account Executives document each action plan, properly list all specific risks at a property, identify the root causes of these risks, specify the actions to address the root causes, establish the timetables for completion, and document monthly progress towards completion of the actions in iREMS.
Publication Report
2026-BO-0001 | April 02, 2026
HUD Did Not Always Address Risks Reported in Borrowers’ Audited Financial Statements for Section 232 Residential Care Facility Portfolios
We audited the U.S. Department of Housing and Urban Development (HUD), Office of Residential Care Facilities’ (ORCF), oversight of Section 232 residential care facilities’ mortgage insurance program. We performed this audit because HUD-insured… moreRelated Recommendations
Housing
- Status2026-BO-0001-001-AOpenClosed$329,541,272.00Funds Put to Better Use
Recommendations that funds be put to better use estimate funds that could be used more efficiently. For example, recommendations that funds be put to better use could result in reductions in spending, deobligation of funds, or avoidance of unnecessary spending.
Work with borrowers and lenders to develop a plan to address the issues for each of the 58 defaulted loans within a reasonable time frame and implement corrective actions for the 58 loans; thereby protecting HUD’s investment of $329,541,272.
- Status2026-BO-0001-001-BOpenClosed
Quantify the amount of unauthorized distributions in the portfolio of 21 properties with 35 loans reported by the independent public accountant on the borrowers’ audited financial statements covering fiscal years 2018 to 2024 and require the borrowers to repay the amount of unauthorized distributions or pursue enforcement of the borrowers’ regulatory agreements by a written referral to HUD’s DEC.
- Status2026-BO-0001-001-COpenClosed
Flag all principals of the borrowers with unreimbursed and unauthorized distributions in the Active Partners Performance System (APPS) to ensure that HUD appropriately evaluates the risks associated with doing business with these principals.
- Status2026-BO-0001-001-DOpenClosed
Refer any borrowers to the DEC for a civil money penalty or any other appropriate enforcement actions within 60 days of borrowers’ financial statement receipts for all unauthorized distributions not repaid within 30 days. If HUD ORCF chooses to allow a longer repayment period, document in iREMS the amount of the loan, the longer repayment period, and the reasons for the longer period.
- Status2026-BO-0001-001-EOpenClosed
Document DEC decisions and any penalties awarded in iREMS for each affected property for any ORCF referrals to the DEC about unauthorized loans.
- Status2026-BO-0001-001-FOpenClosed
Flag any borrowers in APPS for each unpaid penalty to ensure that HUD appropriately evaluates the risks associated with doing business with these principals.
- Status2026-BO-0001-001-GOpenClosed
Determine and document in iREMS the reasons that the borrowers did not make the mortgage payments and the specific steps HUD is taking to address the borrowers’ failure to make mortgage payments for all failures to make mortgage payments listed in borrowers’ audited financial statements.
- Status2026-BO-0001-001-HOpenClosed
Train HUD Account Executives on how to evaluate borrower action plans to ensure that action plans identify specific risks, identify the root causes of each risk, develop actions to address each root cause, identify specific measurable goals for each risk, and establish a timetable to complete the planned actions. Also, train HUD Account Executives on how to work with borrowers and lenders to ensure that borrowers properly develop, implement, and adhere to their action plans.
- Status2026-BO-0001-001-IOpenClosed
Develop and implement policies and procedures to ensure that borrowers and lenders execute action plans that properly list all specific risks at a property, identify the root causes of each risk, specify the actions to address each root cause, and establish a timetable to complete each action.
- Status2026-BO-0001-001-KOpenClosed
Develop and implement policies and procedures for a course of action when borrowers and/or lenders do not timely develop action plans. These policies and procedures should include civil money penalties, flagging the borrower in APPS, and inclusion in the Excluded Parties List System.
- Status2026-BO-0001-001-LOpenClosed
Update the protocols to ensure that all HUD ORCF teams working with any subset of the portfolio have insight into the entire portfolio for any portfolio split amongst lenders.