HUD's Accounting System for Secretary-Held Multifamily Mortgages

The Department of Housing and Urban Development's (HUD) system for Secretary-held multifamily mortgages provides monthly payment and billing data to the mortgagors and the HUD field offices. However, the system does not provide servicing personnel with adequate information to service their workload aggressively, nor does it track the payment status of mortgages under the terms of workout agreements. In both of the HUD field offices visited, the monthly bills sent from the HUD Office of Finance and Accounting in Washington, D.C., were generally received late and were of limited use in servicing the projects. The servicer, in many instances, did not know the status of new accounts because the Office of Finance and Accounting often took many months to prepare the first bill. Late charges on delinquent mortgages could not be assessed because the accounting system did not track compliance with the payment terms of workout agreements. While tax payments on Secretary-held single-family mortgages have been decentralized, the tax paryments for multifamily projects have remained centralized. Numerous under- and overpayments reflected on the records of taxing authorities cause many problems and indicate a need for HUD and taxing authority records to be reconciled periodically from the HUD field offices. Major improvements are needed in servicing at the HUD New York field office to resolve problems arising from a lack of workout agreements, delinquent and expired agreements, and informal agreements. Financial analysis of annual reports for each project is limited and requires improvement to be in compliance with regulations. Field office officials stated that their analysis of financial information did not conform to HUD requirements. This failure to receive and/or review required financial information is a serious breakdown in the HUD internal control system and creates a situation where project receipts can easily be diverted. GAO believes that the problems with the HUD multifamily Secretary-held program are so serious and widespread that the Senate Subcommittee on HUD and Independent Agencies might wish to ask HUD to report periodically on the status of corrective actions and their effectiveness in correcting these problems.