Identify loans with COVID-19 recovery partial claims that were affected by the improper application of partial claims funds and update the accounts.

Identify FHA borrowers who received a non-HUD-approved loss mitigation option and ensure that the borrowers receive an updated approved HUD loss mitigation option.

Update the servicing script to include information related to the HAF program, identify borrowers who may benefit from HAF, and conduct outreach to these borrowers.

HUD (a) identify all contracts related to its programs that pre-date July 1, 2013 and that have not yet been modified to include Section 4712 whistleblower protections; and (b) review all contracts entered into on or after July 1, 2013, to ensure they include a clause that requires contractors to comply with Section 4712.

Seek voluntary cooperation from program participants to proactively modify pre-2013 contracts for the purpose of including a clause requiring compliance with Section 4712.

Status

HUD provided a Management Plan that identifies actions HUD is taking to address the recommendation. The OIG and HUD have not reached an agreement that the actions proposed will fully address the recommendations. Additionally, HUD has not completed several of the proposed actions and is still collecting information that responds to the recommendations.

Analysis

To fully address this recommendation, HUD must provide evidence that it has sought voluntary cooperation from program participants to proactively modify pre-2013 contracts for the purpose of including a clause requiring compliance with Section 4712.

Implementation of this recommendation will ensure that Section 4712 whistleblower protections will apply to all individuals working for HUD contractors.

Use its best efforts to include a clause requiring compliance with Section 4712 at the time of major modifications to contracts with program participants with whom HUD is unable to gain voluntary cooperation.

Status

HUD provided a Management Plan that identifies actions HUD is taking to address the recommendation. The OIG and HUD have not reached an agreement that the actions proposed will fully address the recommendations. Additionally, HUD has not completed several of the proposed actions and is still collecting information that responds to the recommendations.

Analysis

To fully address this recommendation, HUD must provide evidence that it has taken steps to ensure that it includes a clause requiring compliance with Section 4712 at the time of major modifications to contracts with program participants with whom HUD is unable to gain voluntary cooperation.

Implementation of this recommendation will ensure that Section 4712 whistleblower protections will apply to all individuals working for HUD contractors.

HUD seek legislative authority to expeditiously include Section 4712 protections within contracts for which HUD believes it must otherwise wait until there is a major modification.

HUD develop and implement controls to ensure that the provisions of Section 4712 are included in all contracts.

Require lenders to execute indemnification agreements covering a period of at least 5 years for each of the 20 loans for which the lenders did not comply with the temporary endorsement policy and related instructions, including loans for which the lenders did not execute an agreement when required or that were otherwise ineligible for insurance, and properly store the agreements and record the agreement data to put up to $1,811,238 to better use by avoiding potential losses.

Obtain guidance from the Office of General Counsel regarding the implications of allowing lenders to retroactively apply forbearance in cases in which the borrower requests forbearance after the lender submits the loan for endorsement to ensure that it consistently handles such cases.

Request and analyze data from lenders for the 3,024 loans at risk of noncompliance to identify loans that should have been subject to the temporary endorsement policy or were otherwise ineligible for insurance. The data requested should include but not be limited to the dates when the borrower requested forbearance, the loan became subject to forbearance, and the loan was submitted for endorsement.

For any of the 3,024 loans found to be subject to the temporary policy or otherwise ineligible for insurance, require the lenders to execute indemnification agreements covering a period of at least 5 years or reimburse HUD for any claims to put up to $26,840,071 to better use by protecting HUD against potential losses. For any indemnification agreements executed, HUD should properly store the agreements and record the agreement data.

Update data in HUD’s system for the three cases in which the lender incorrectly reported the loans as in COVID-19 forbearance at the time of endorsement to ensure that accurate data are maintained.

Consider implementing a policy to review any of the 292 loans not reviewed as part of this audit that result in a request for claim to ensure that the loans qualified for endorsement under the temporary endorsement policy so that HUD can avoid unnecessary payments for loans that should not have been endorsed.

Record indemnification agreement data in its system for the 34 loans for which the lender properly executed an indemnification agreement before endorsement and HUD had not recorded the agreement in its system to put up to $3,493,636 to better use by avoiding potential losses.

Review and correct indemnification agreement data in HUD’s computer systems as needed for all agreements currently classified as having 2-year terms and all agreements related to 2-year agreements contained on its SharePoint site to ensure that its systems contain accurate data for monitoring and enforcement of agreements. This recommendation includes but is not limited to reviewing the agreement number, agreement term, billing lender, expiration date, refinance indicator, and source indicator.

Update indemnification agreements or obtain updated indemnification agreements for the 30 loans for which the indemnification agreements had incorrect or missing information or were not signed by HUD and upload them to its SharePoint site so that such agreements are properly executed and can be traced to HUD’s computer systems for future use.

Consider evaluating whether and how a similar policy for disasters or emergencies or a permanent version of the policy could be used to manage risk to the insurance fund while increasing lender participation. This should include further studying lenders’ use of the policy and the long-term performance of loans endorsed under it. It could also include reviewing the compliance, guidance, and process issues identified during this audit and through the resolution of the other recommendations to refine any future endorsement policies related to forbearance.

We recommend that the Acting Deputy Assistant Secretary for Single Family Housing coordinate with OCPO to require that the contracting officers and CORs be involved in the development, implementation, and documentation of the FSM QASPs for their FSM contracts to ensure that performance statements, acceptable quality levels, and deviation percentages are aligned with the contracts’ requirements in the performance work statement, the performance requirement summary, and the contractor’s quality control plan.

We recommend that the Acting Deputy Assistant Secretary for Single Family Housing coordinate with OCPO to require the contracting officers and CORs to monitor contractor performance to ensure that evidence is maintained and documented in the contract files for each performance statement completed in the FSM QASPs and that contractor quality control report deliverables resolve problems identified by the Government during reviews conducted in accordance with the QASP for its future FSM contracts.