Reassess the model design that was implemented to avoid the double counting of the cash flows for HECM mortgages in the LLG cash flow and ROA models and perform the following: (1) determine whether there are alternative methodologies that will not result in the exclusion of cash flows in both models, (2) document the basis of the selected methodology, and (3) determine the impact and risk of the selected methodology.

Reassess the HECM assumption that mortgages with an unpaid principal balance greater than the maximum claim amount will not be assigned to HUD and perform the following: (1) compare this assumption to historical experience, (2) document the basis for selecting the assumption as opposed to alternative assumptions, and (3) determine the impact of this assumption and the associated risk.

Develop alternative policies and procedures that would enable the use of the final single-family LLG cash flow model results and HECM return on notes cash flow model results in the final ROA models.

Revise the modeling policies and procedures to use the established HECM loan limits in the HECM LLG cash flow model.

Correct the impact of all of the modeling errors identified in this report.

Take appropriate administrative action against FTB for violations of the settlement agreement.

Develop and implement controls to ensure that indemnification agreements that result from U.S. Department of Justice settlements have been properly recorded in FHA Connection.

Record in FHA Connection the remaining indemnified loans, avoiding $47,433,895 in estimated losses. The estimated loss is based on the loss severity rate of 46 percent of the total unpaid principal balance of $103,117,164.

Require FTB to reimburse HUD $311,699 for 2 loans for which HUD incurred losses when it sold the properties and 15 loans for which FHA insurance had been terminated and HUD had paid loss mitigation claims to FTB.

Use the project’s security deposits bank account to deposit and disburse security deposits.