We reviewed Seneca Mortgage’s servicing of Federal Housing Administration (FHA)-insured mortgages and its implementation of the U.S. Department of Housing and Urban Development’s (HUD) Loss Mitigation program. We selected Seneca Mortgage based on the results of our single-family risk assessment. The objective of the audit was to determine whether Seneca Mortgage complied with HUD’s Loss Mitigation program requirements and implemented an effective quality control program.
Seneca Mortgage generally complied with HUD’s Loss Mitigation program requirements for servicing its portfolio of FHA-insured mortgages. However, it did not always ensure that its servicing data were accurately reported in HUD’s systems and did not ensure that properties were conveyed to HUD within 30 days of securing the property. Seneca Mortgage implemented an effective quality control program for mortgages that it serviced but did not have procedures for reviewing loans included in a subservicing agreement with another FHA-approved lender.
We recommend that HUD instruct Seneca Mortgage to (1) repay $19,136 in ineligible holding costs to the FHA insurance fund; (2) ensure that reimbursement is not requested for holding costs incurred beyond the conveyance deadline related to FHA loan number 281-3493258; (3) instruct the investors and holders for FHA loan numbers 501-7067695, 501-6877136, 061-0982338, and 501-5885504 to transfer these loans to FHA-approved servicers; (4) implement procedures to ensure that FHA loans are transferred only to FHA-approved servicers regardless of investor input; (5) strengthen conveyance procedures to ensure that properties are transferred to HUD within 30 days of securing the property; (6) strengthen program controls and procedures to ensure that servicing efforts are accurately reported in HUD systems; and (7) develop program controls and procedures for FHA-insured loans that are a part of the subservicing agreement with another lender.