Home Improvement

Title I home improvements, which are insured by the Department of Housing and Urban Development (HUD), are available to owners who have little equity in their homes. If borrowers default on their loans, banks submit claims to HUD, which approves or denies them. GAO found that program management and oversight is weak. HUD does not know who the program is servicing, if lenders are complying with program regulations, and whether potential program abuses are occurring.

GAO noted that: (1) its preliminary analysis shows that HUD is not collecting information needed for managing the program; (2) specifically, GAO found that HUD collects little information when loans are made on program borrowers, properties, and loan terms, such as the borrower's income and the address of the property being improved; (3) moreover, HUD does not maintain information on why it denies loan claims or why it subsequently approves some for payment; (4) HUD also provides limited oversight of lenders' compliance with program regulations, conducting only 2 on-site lender reviews in fiscal year 1997 of the approximately 3,700 program lenders; (5) regarding the need for oversight of lenders' compliance, GAO found that loan claim files submitted by lenders to HUD following loan defaults often do not contain required loan documents, including the original loan applications and certifications signed by the borrower that the property improvement work has been completed; (6) in addition, some claims were paid by HUD even though there were indications that lenders did not comply with required underwriting standards when insuring the loan; (7) as a result of the management and oversight weaknesses GAO has observed, its preliminary work indicates that HUD does not know who the program is serving, if lenders are complying with program regulations, and whether certain potential program abuses are occurring, such as violations of the $25,000 limitation on the amount of Title I loan indebtedness for each property; (8) HUD officials attributed these weaknesses to the program's being lender-operated, limited staff resources, and HUD's assignment of monitoring priorities; (9) under the HUD 2020 Management Reform Plan and related efforts, HUD is making significant changes in all of its single-family housing programs, including the Title I property improvement program; (10) these changes are motivated in part by HUD's goals to downsize the agency and address long-standing agencywide management weaknesses; and (11) GAO is assessing the extent to which these changes may affect the management and oversight weaknesses it identified.