Weaknesses in Servicing and Accounting for Home Mortgages Held by HUD

The number and value of mortgages held by the Department of Housing and Urban Development (HUD) increased from 8,103, valued at about $117 million in 1977, to 10,022 valued at over $151 million in 1979. HUD did not have adequate plans for such a sizable workload increase, and consequently, the program has been hampered by accounting and mortgage servicing problems.

As a result of the HUD accounting problems, over $17 million in delinquent mortgage payments have not been collected, interest free escrow advances amounting to almost $2.7 million are outstanding, and delinquent mortgagors have been over or under charged as much as $3 million for such items as interest and tax penalties. Part of the undercharge resulted from problems with the design of the HUD computerized mortgage notes accounting system. Homeowner's were overcharged because HUD did not promptly post payments, often charged tax penalties to the mortgagors, and did not reduce interest charges for prepayments. The HUD mortgage servicing efforts have been hampered by outdated procedures and ineffective collection practices, such as untimely foreclosure actions. These conditions contribute to the high volume of delinquent mortgage payments. Due to the accounting and servicing weaknesses, delinquent mortgagors have little incentive to pay off their mortgages. While HUD has made a number of changes to improve its activities, additional changes are needed to reduce the mortgage payment delinquency rate and to promptly collect funds due to the Government.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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