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We audited the Kentucky Housing Corporation’s administration of the U.S. Department of Housing and Urban Development’s (HUD) Loss Mitigation program for loans insured by the Federal Housing Administration (FHA).  We selected the Corporation based on our analysis of risk factors of single-family loan servicers in Region 4’s jurisdiction.  Our audit objective was to determine whether the Corporation accurately reported the default status and reason codes and the delinquency status of FHA-insured loans to HUD.

The Corporation did not always accurately report the default status and reason codes and the delinquency status of FHA-insured loans in HUD’s system.  This condition occurred because the Corporation staff lacked adequate training.  As a result, HUD did not always have complete and accurate information to (1) properly assess the performance of FHA-insured loans and (2) effectively monitor the Corporation’s loss mitigation efforts.

We recommend that the Acting Deputy Assistant Secretary for Single Family Housing require the Corporation to provide adequate training to staff responsible for making entries to ensure accurate reporting in HUD’s system.  The training should include but not be limited to ensuring that its staff understands all of HUD’s reporting requirements.