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The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General, audited the Leawood, Kansas, branch office of Clarion Mortgage Capital, a Federal Housing Administration (FHA)-approved loan correspondent. Our audit objective was to determine whether Clarion Mortgage Capital followed HUD requirements for implementing a quality control program. We concluded that Clarion Mortgage Capital did not fully comply with HUD's or its own quality control process. It did not ensure that its quality control contractor reviewed loans within the proper timeframes. Also, it did not document on-site quality control reviews of the branch office and document corrective actions taken to address deficiencies identified in the quality control reports.

We recommended that the Assistant Secretary for Housing - Federal Housing Commissioner verify that Clarion Mortgage Capital has fully implemented a quality control program that complies with HUD requirements.