HUD's Management and Monitoring of the Clifton Terrace Apartments and General Information on Assigned Multifamily Projects

Certain past and present GAO reviews of the Department of Housing and Urban Development's (HUD) management of its multifamily mortgage programs are discussed. Concerning the Clifton Terrace project, the information obtained from available files indicated that HUD: (1) sold the Clifton Terrace property to P.I. Properties, Inc., under unusual circumstances, and at a price $400,000 below that which was originally agreed upon; (2) inadequately monitored the activities of the new owners; and (3) delayed foreclosure on the project despite indications of serious financial problems. HUD currently holds the mortgages on about 2,000 multifamily projects valued at about $3 billion, 75 percent of which have delinquencies in their mortgage payments totaling as much as $500 million. HUD also owns 500 additional projects as a result of mortgage foreclosures. The problems of defaults, inadequate monitoring, inadequate mortgage servicing, and lengthy periods between default and foreclosure have been noted in other GAO reports and testimony. Specifically, HUD is not using two important management tools on the mortgages: the monthly financial statements required from project owners; and the annual audit reports required from independent public accountants. There is a need for a broad range of substantive action by HUD to deal with the problems exemplified by the Clifton Terrace project.