The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General audited the Wyoming Housing Opportunities Association (Association) based on information obtained during a separate audit of the Wyoming Community Development Authority (State Finance Agency), which indicated that 51 Federal Housing Administration (FHA) mortgages with the same borrower had defaulted. The purpose of our audit was to determine whether the Association developed, originated, and managed the 51 units of village Creek in accordance with Federal regulations. .
During the course of our audit of the Association, we determined that the State Finance Agency played a key role in the development and the loan origination of Village Creek. However, it did not ensure that safeguards or agreements were in place with the tenants to guarantee the tenants would be given the opportunity to purchase the units at the reduced FHA principal balance. Further, it did not practice due diligence in ensuring that these loans conformed to HUD standards. Therefore, once the loans closed, the FHA insurance fund was at risk for default. This memorandum is to request that HUD consider referring the State Finance Agency to the Mortgagee Review Board for its part in the inappropriate development of and loan origination for the Village Creek Townhomes.