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We audited the Georgia Housing and Finance Authority’s implementation of the Federal Housing Administration’s Home Affordable Modification Program (FHA-HAMP).  We selected the Authority because (1) our data analysis showed that the Authority had the highest ratio of FHA-HAMP actions to delinquent loans within the jurisdiction of our regional office, (2) the U.S. Department of Housing and Urban Development (HUD) office located in Atlanta, GA, performed a review in 2012 that identified multiple loss mitigation and servicing deficiencies, and (3) it was part of our annual audit plan.  Our audit objective was to determine whether the Authority properly implemented its FHA-HAMP in accordance with HUD’s requirements.

The Authority did not adequately implement its FHA-HAMP in accordance with HUD’s requirements.  Specifically, it did not (1) comply with the market rate condition required for FHA-HAMP stand-alone partial claims, (2) ensure that the borrowers successfully completed their trial payment plans, (3) support that it properly evaluated and independently verified the borrowers’ financial information, and (4) support that it properly calculated the partial claim and loan modification amounts.  As a result, HUD paid more than $1.1 million for 138 loans that were not eligible or supported for proper implementation of FHA-HAMP, including three active modified loans with unpaid principal balances of $241,031.

We recommend that HUD’s Deputy Assistant Secretary for Single Family Housing require the Authority to (1) reimburse HUD $160,013  for claims and incentive fees paid for 10 loans that were not FHA-HAMP eligible, (2) indemnify HUD for two active modified loans with total unpaid balance of $102,241 that were not FHA-HAMP eligible, (3) support or reimburse HUD $941,770 for claims and incentive fees paid on 124 loans that may not have been eligible for FHA-HAMP, (4) support or reimburse HUD $74,767 for partial claims and incentive fees paid for three loans that were not supported as eligible for FHA-HAMP, (5) support or indemnify HUD for one active modified loan with unpaid balance of $138,790 that was not supported as eligible for FHA-HAMP, and (6) improve its written policies and procedures to ensure implementation of FHA-HAMP in accordance with HUD’s requirements.