Multifamily Housing
Improvements Needed in HUD's Oversight of Lenders That Underwrite FHA-Insured Loans Gao ID: GAO-02-680 July 19, 2002Each year, the Federal Housing Administration (FHA) insures billions of dollars in multifamily housing mortgage loans to help construct, rehabilitate, purchase, and refinance apartments and health care facilities. However, the Department of Housing and Urban Development (HUD) lacks assurances that the lenders approved for the Multifamily Accelerated Processing (MAP) program always meet all of HUD's qualifications. HUD's guidance requires prospective lenders to submit documents showing that they are financially sound, have a satisfactory lending record, and have qualified underwriters. GAO found that HUD did not always comply with, or effectively implement, controls and procedures for reviewing and monitoring MAP lenders' underwriting of loans. Before issuing a loan, field staff are required to conduct and document reviews of lenders' mortgage insurance applications and associated loan exhibits to ensure compliance with HUD underwriting requirements. However, staff did not always properly document their reviews. HUD has held some lenders accountable for specific violations of program requirements but is unable to systematically identify lenders that exhibit patterns of noncompliance. To hold lenders accountable for specific violations or for patterns of noncompliance, HUD's Office of Multifamily Housing can suspend or terminate their ability to participate in the MAP program.
RecommendationsOur 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.
Director: Team: Phone:GAO-02-680, Multifamily Housing: Improvements Needed in HUD's Oversight of Lenders That Underwrite FHA-Insured Loans
This is the accessible text file for GAO report number GAO-02-799
entitled 'Multifamily Housing: Improvements Needed in HUD‘s Oversight
of Lenders That Underwrite FHA-Insured Loans' which was released
on July 19, 2002.
This text file was formatted by the U.S. General Accounting Office
(GAO) to be accessible to users with visual impairments, as part of a
longer term project to improve GAO products' accessibility. Every
attempt has been made to maintain the structural and data integrity of
the original printed product. Accessibility features, such as text
descriptions of tables, consecutively numbered footnotes placed at the
end of the file, and the text of agency comment letters, are provided
but may not exactly duplicate the presentation or format of the printed
version. The portable document format (PDF) file is an exact electronic
replica of the printed version. We welcome your feedback. Please E-mail
your comments regarding the contents or accessibility features of this
document to Webmaster@gao.gov.
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed
in its entirety without further permission from GAO. Because this work
may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this
material separately.
United States General Accounting Office:
GAO:
Report to the Ranking Minority Member, Permanent Subcommittee on
Investigations, Committee on Governmental Affairs, U.S. Senate:
July 2002:
Multifamily Housing:
Improvements Needed in HUD‘s Oversight of Lenders That Underwrite FHA-
Insured Loans:
GAO-02-680:
Contents:
Letter:
Results in Brief:
Background:
HUD Had Reasonable Assurance that MAP Lenders Met Requirements for
Financial Soundness and Lending Performance, but Not for Qualified
Underwriters:
Processes and Procedures for Reviewing and Monitoring MAP Lenders‘
Underwriting of Loans Were Not Always Effectively Implemented:
HUD Has Held Some Lenders Accountable for Specific Violations, but Has
Had a Limited Basis for Identifying Lenders with Patterns of
Noncompliance:
Conclusions:
Recommendations for Executive Action:
Agency Comments:
Appendix I: Comments from the Department of Housing and Urban
Development:
Appendix II: Objectives, Scope, and Methodology:
Appendix III: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Acknowledgments:
Table:
Table 1: Number of Loans Missing Required Review Documents:
Figures:
Figure 1: Value of MAP Loans Insured during Fiscal Year 2001, by Loan
Type:
Figure 2: Percentage of Underwriters Whose Resumes Did Not Demonstrate
that They Met Qualifications for the MAP Program:
Figure 3: MAP Team Workloads at Time of GAO‘s Visits Compared with
HUD‘s Standard:
Abbreviations:
FHA: Federal Housing Administration:
GAO: General Accounting Office:
HUD: Department of Housing and Urban Development:
MAP: Multifamily Accelerated Processing:
[End of section]
United States General Accounting Office:
Washington, DC 20548:
July 19, 2002:
The Honorable Susan M. Collins:
Ranking Minority Member:
Permanent Subcommittee on Investigations:
Committee on Governmental Affairs:
United States Senate:
Dear Senator Collins:
Each year, the Department of Housing and Urban Development‘s (HUD)
Federal Housing Administration (FHA) insures billions of dollars in
multifamily housing mortgage loans to facilitate the construction,
substantial rehabilitation, purchase, and refinancing of apartments and
health care facilities. FHA mortgage insurance protects lenders against
financial losses stemming from a borrower‘s default. When default
occurs, a lender may elect to assign the mortgage to HUD and file an
insurance claim with HUD for the unpaid principal balance of the loan.
As of September 30, 2001, FHA had approximately 15,000 multifamily
mortgages in its insured portfolio, with a total unpaid principal
balance of about $55 billion. In May 2000, HUD implemented a program
called Multifamily Accelerated Processing (MAP) to expedite and
standardize the insurance application process for its most frequently
used multifamily loan programs. Similar to HUD‘s Direct Endorsement
program for single-family housing lenders, a key feature of the MAP
program is its delegation of significant responsibilities to
multifamily housing lenders for underwriting the loans that FHA
insures. To mitigate its financial risks, HUD developed controls and
procedures designed to ensure that lenders participating in the MAP
program are qualified and are complying with FHA‘s underwriting
standards. HUD‘s Office of Multifamily Housing and multifamily housing
field offices are responsible for implementing these controls and
procedures.
In April 2000, we reported on weaknesses in HUD‘s oversight of single-
family lenders participating in the Direct Endorsement program.
[Footnote 1] Concerned that similar problems might exist with
multifamily lenders, you asked us to provide information on HUD‘s
oversight of lenders participating in the MAP program. Accordingly, our
report addresses the following questions: (1) How well does HUD ensure
that lenders participating in the MAP program meet HUD‘s qualification
requirements? (2) How well is HUD implementing its processes for
reviewing and monitoring MAP lenders‘ underwriting of loans? (3) Has
HUD held any MAP lenders accountable for noncompliance with program
requirements? To address these questions, we reviewed the activities of
HUD‘s Office of Multifamily Housing and 8 of its 51 multifamily field
offices in Baltimore, Maryland; Chicago, Illinois; Cleveland, Ohio;
Denver, Colorado; Fort Worth, Texas; Phoenix, Arizona; San Antonio,
Texas; and San Francisco, California. Our work focused on the 35 new
construction and substantial rehabilitation loans insured under the MAP
program by these 8 offices between May 2000 and August 2001, and the 20
lenders that made these loans. The 35 loans had a total value of
approximately $500 million, or about 75 percent of the value of all new
construction and substantial rehabilitation loans insured under the MAP
program during that period. The 20 lenders accounted for about half of
those that made MAP loans during that timeframe. Appendix II provides
detailed information on our objectives, scope, and methodology.
Results in Brief:
HUD lacks assurance that the lenders approved to participate in the MAP
program always met all of HUD‘s qualification requirements. HUD‘s
guidance requires prospective MAP lenders to submit documents showing
that the lender is financially sound, has a satisfactory lending
record, and has qualified underwriters. HUD uses this documentation,
which includes audited financial statements and staff‘s resumes, as its
primary basis for approving or rejecting a lender. Our review of HUD‘s
approval files for 20 MAP lenders found that HUD followed its
procedures in determining that these lenders met requirements for
financial soundness and satisfactory lending. However, we also found
that HUD did not always have a sufficient basis for determining that
the lenders‘ underwriters met qualification standards. For example, the
resumes for 22 of the lenders‘ 81 underwriters did not provide clear
evidence that these individuals had at least 3 years of recent
multifamily underwriting experience, as required by HUD‘s guidance.
Finally, in approving MAP lenders, HUD did not determine whether the
lenders had required quality control plans, an internal control
mechanism designed to ensure compliance with HUD‘s underwriting
requirements. In large part, these problems occurred because of HUD‘s
insufficient guidance to its own staff and to MAP lenders.
HUD did not always comply with or effectively implement controls and
procedures for reviewing and monitoring MAP lenders‘ underwriting of
loans. HUD‘s procedures require field staff, prior to insuring a loan,
to conduct and document reviews of lenders‘ mortgage insurance
applications and associated loan exhibits to ensure lenders‘ compliance
with HUD underwriting requirements. However, at the field offices we
visited, we found that the staff did not always properly document their
reviews. For example, we found that the staff did not prepare one or
more of the required review documents for 28 of the 35 loans we
examined. Furthermore, the field offices did not always ensure that
lenders were adhering to HUD‘s underwriting requirements, including
those for property appraisals. Among other things, the appraisal is to
include estimates of the income and operating expenses of the property
being insured. For 9 of the loans we found that the operating expenses
for the insured properties were understated by 5 to 9 percent, because
the field office did not enforce HUD‘s requirement to update the
expense estimates to the date of the appraisal. The field offices
attributed these problems, among other things, to unclear guidance and
to the field offices‘ heavy workloads. HUD also instituted a process to
monitor MAP lenders‘ underwriting of loans through quality assurance
reviews of loans already approved for mortgage insurance. However, as
of March 2002”almost 2 years after the MAP program‘s inception”HUD had
not fully staffed the division responsible for this function. As a
result, the division conducted 24 reviews in fiscal year 2001, which,
according to the division director, is only about one-third the number
that a fully staffed division could have performed. In addition, the
division has not developed written operating procedures or a systematic
process for analyzing the results of its reviews.
HUD has held some MAP lenders accountable for specific violations of
program requirements but has had a limited basis for identifying any
lenders that might exhibit patterns of noncompliance. To hold lenders
accountable for specific violations or for patterns of noncompliance,
HUD‘s Office of Multifamily Housing can suspend or terminate their
ability to participate in the MAP program. As of March 2002,
Multifamily Housing had suspended three MAP lenders for specific
violations. In contrast, it had not sanctioned any lenders for
exhibiting patterns of noncompliance, because weaknesses in its quality
assurance process and the newness of the MAP program provided a limited
basis for identifying such patterns.
This report makes recommendations to the Secretary of HUD designed to
improve HUD‘s processes for approving lenders to participate in the MAP
program and for reviewing and monitoring these lenders‘ underwriting of
FHA-insured loans. HUD agreed with each of our recommendations.
Background:
Established by the National Housing Act, FHA administers several
programs that support multifamily housing for low- and moderate-income
families by insuring loans made by private lenders. Specifically, these
programs insure mortgage loans for the construction, purchase,
substantial rehabilitation, and refinancing of multifamily apartments
and health care facilities. FHA insures most of its mortgages for
multifamily housing under its General Insurance Fund and Special Risk
Insurance Fund. To cover lenders‘ losses, FHA collects insurance
premiums that borrowers pay to the lenders and deposits the premiums
into the funds. In addition, because the funds were not designed to be
self sustaining, Congress provides budget authority as part of FHA‘s
budget each fiscal year to cover anticipated costs”known as ’credit
subsidy costs“”for some of the multifamily insurance programs.
[Footnote 2] In fiscal year 2001, Congress provided $101 million in
credit subsidy budget authority to FHA.
When a default occurs on an insured loan, the lender may elect to assign
the mortgage to HUD”effectively making the Department the new lender
for the mortgage [Footnote 3]”and file an insurance claim with HUD for
the unpaid principal balance of the loan. [Footnote 4] As a result, the
lender is protected from financial losses stemming from a borrower‘s
default. FHA‘s multifamily insurance programs also benefit borrowers by
providing favorable financing terms. For example, under one of the
programs, nonprofit borrowers can finance up to 100 percent of a
project‘s replacement costs, and for-profit borrowers can finance up to
90 percent of these costs. As of September 30, 2001, FHA had about
15,000 multifamily mortgages in its insured portfolio, with a total
unpaid principal balance of approximately $55 billion.
To obtain an FHA-insured loan, a prospective borrower must use a lender
approved by HUD‘s Lender Approval and Recertification Division, and the
HUD-approved lender, in turn, must submit a mortgage insurance
application to HUD. HUD‘s multifamily housing field offices”comprising
18 ’hubs“ and their associated 33 program centers”are responsible for
processing the applications and approving or rejecting them.
Historically, these responsibilities included the bulk of the loan
underwriting duties, such as preparation of the property appraisal,
mortgage credit analysis, and other loan exhibits. Because this process
was often slow and inefficient, in 1994 HUD developed an expedited
approach for processing loan insurance applications”known as ’fast-
track“”that delegated certain underwriting functions to the lenders.
About 30 of HUD‘s field offices eventually adopted fast-track
processing, but, according to HUD, variations existed among the offices
regarding the extent of the functions delegated to the lenders and the
thoroughness of the offices‘ review of loan documents.
In order to standardize the responsibilities of both lenders and the
field offices, in May 2000, HUD implemented the Multifamily Accelerated
Processing (MAP) program for several of its insurance programs,
including the most widely used programs. [Footnote 5] HUD‘s objective
for the MAP program was to provide a consistent, reliable, and
expedited process that would enable FHA to insure more loans while
limiting risk to the FHA insurance funds. To accomplish this objective,
HUD, among other things, developed a new guidebook for lenders and HUD
staff and established set time frames for the mortgage insurance
application and review process. In addition, although HUD delegated
significant underwriting responsibilities to the lenders, it continued
to retain the final underwriting decision authority. Under MAP, a
lender‘s insurance application goes through a two-stage review process.
[Footnote 6] The first stage, called ’pre-application,“ focuses on the
overall eligibility and feasibility of the property to be insured (for
example, whether a sufficient market exists for the property). If an
application passes this stage, HUD invites the lender to submit a
complete set of underwriting exhibits as part of the second stage,
known as ’firm commitment.“ If the application passes this stage and
the borrower agrees to accept the conditions of the FHA mortgage
insurance agreement, the loan becomes FHA-insured.
Although only about 30 percent of all multifamily loans insured by FHA
in fiscal year 2001 were insured through the MAP program, HUD expects
that in subsequent years the large majority of its insured multifamily
loans will be MAP loans. During fiscal year 2001, HUD insured 212 loans
under the MAP program, with a total value of about $1.5 billion. As
shown in figure 1, this total was about equally divided between new
construction and substantial rehabilitation loans and refinancing and
acquisition loans.
Figure 1: Value of MAP Loans Insured during Fiscal Year 2001, by Loan
Type:
[See PDF for image]
This figure is a pie-chart, depicting the following data:
Value of MAP Loans Insured during Fiscal Year 2001, by Loan Type:
New construction or substantial rehabilitation of apartments: 44%
($683,7 million);
Refinancing or acquisition of existing health care facilities: 30%
($461.7 million);
Refinancing or acquisition of existing apartments: 21% ($325.7
million);
New construction or substantial rehabilitation of health care
facilities: 5% ($72.2 million).
Source: GAO analysis of data from HUD.
[End of figure]
To mitigate the financial risks of the MAP program, HUD established
controls and procedures covering the (1) approval of MAP lenders, (2)
review and monitoring of lenders‘ underwriting of loans, and (3)
sanctioning of poorly performing lenders. Specifically:
* HUD requires HUD-approved lenders wanting to participate in the MAP
program to apply to the Lender Qualifications and Monitoring Division
within HUD‘s Office of Multifamily Housing. The division is responsible
for reviewing documentation submitted by the lender and deciding
whether or not the lender meets the MAP program‘s qualification
standards. In addition, for every mortgage insurance application
submitted by a MAP lender, the cognizant HUD multifamily field office
is required to review the qualifications of the lender‘s staff involved
in making the loan. As of March 2002, HUD had approved about 100
lenders to participate in the MAP program.
* HUD‘s multifamily field offices are responsible for conducting and
documenting reviews of MAP mortgage insurance applications and
associated loan exhibits (for example, appraisal, market study) to
ensure lenders‘ compliance with HUD‘s underwriting requirements. At
both stages of the application process, a team of technical
specialists, known as a MAP team, with expertise in the areas of
architecture, property appraisal, mortgage credit, and building costs
reviews the application and its associated underwriting exhibits. The
MAP team may require the lender to correct underwriting deficiencies
uncovered by the reviews. After each stage of review, the team‘s
supervisor, called the MAP team leader, is required to provide a
recommendation to the field office director on whether to accept or
reject the application. On the basis of the team leader‘s
recommendation, the field office director decides whether or not to
insure the loan. The field offices are to complete each stage of their
reviews within 45 to 60 days, depending on the type of loan. To further
monitor MAP lenders‘ underwriting of loans and to oversee the work of
the field offices, teams of field staff assigned to HUD‘s Lender
Qualifications and Monitoring Division are to conduct comprehensive
reviews of samples of loans already approved for mortgage insurance.
These reviews focus on the same four technical areas that the field
offices analyze in reviewing an insurance application. After completing
a review, the teams are to document their findings and recommendations
in written reports, which are to be reviewed and approved by the
division‘s director. Upon approval, the reports are issued to the
cognizant lender and multifamily field office.
* If HUD determines that a lender is not complying with program
requirements, HUD‘s Office of Multifamily Housing may take enforcement
actions against the lender. Specifically, Multifamily Housing has the
authority to suspend or terminate a lender‘s participation in the MAP
program.
HUD Had Reasonable Assurance That MAP Lenders Met Requirements for
Financial Soundness and Lending Performance, but Not for Qualified
Underwriters:
HUD‘s guidance requires an FHA-approved lender wishing to participate in
MAP to submit documentation demonstrating, among other things, that it
is financially sound, has a satisfactory lending record, and has
qualified underwriters. Our review of HUD‘s approval files for 20 MAP
lenders found that HUD followed its procedures in determining that
these lenders met the requirements for financial soundness and
satisfactory lending. However, we also found that HUD sometimes lacked
a sufficient basis for determining whether the lenders‘ underwriters
met MAP qualification requirements. Furthermore, in approving MAP
lenders, HUD did not ensure that the lenders had quality control plans
in accordance with HUD‘s regulations.
Lenders Met Qualifications for Financial Soundness and Lending
Performance:
According to HUD‘s guidance, a lender must, among other things, be
financially sound and have a satisfactory lending record to qualify for
the MAP program. As evidence of its financial soundness, a prospective
MAP lender must provide HUD with a recent audited financial statement
showing a net worth in excess of $250,000. As evidence of a satisfactory
lending record, a lender must submit information on the FHA-insured and
conventional multifamily housing loans it made during the previous 5
years. For the lender‘s FHA-insured loans, the submission must include a
list of the loans that were assigned to HUD for insurance benefits and a
narrative explanation of why the assignments occurred. HUD uses this
information to (1) determine whether the lender has a recent history of
assignments that can be attributed to poor lending practices and (2) ask
cognizant multifamily field offices about their experience with the
lender.
To determine whether approved MAP lenders met HUD‘s requirements, we
examined HUD‘s approval files for the 20 lenders that made the 35 new
construction and substantial rehabilitation loans we reviewed during our
visits to eight of HUD‘s multifamily field offices. We found that all 20
lenders provided the required documentation and that the documentation
adequately supported HUD‘s conclusion that the lenders met the criteria
for financial soundness and satisfactory lending records. Specifically,
we found that 19 of the 20 lenders we reviewed submitted the required
audited financial statements and that the statements showed the lenders
met the net worth requirement. In accordance with HUD‘s guidance, the
remaining lender was exempted from the requirement because its
accounts were insured by the Federal Deposit Insurance Corporation.
[Footnote 7] With respect to lending performance, we used a HUD
database containing assignment information to confirm that all 20
lenders submitted complete lists of their assigned loans. The lenders
either had no loans assigned to HUD or had few assignments relative to
their total number of FHA-insured loans”an indicator of sound lending
practices, according to HUD. In addition, we reviewed the responses
from HUD‘s field offices about each lender‘s performance and found that
the overwhelming majority of the responses supported approval of the 20
lenders.
HUD Lacked Assurance That Lenders‘ Underwriters Were Qualified:
Although HUD retains the authority for the final underwriting decision
for MAP loans, it relies heavily on the lenders‘ underwriters to ensure
that the loans pose a reasonable financial risk. The underwriter is an
employee of the lender, who is responsible for ensuring compliance with
applicable requirements and for approving or rejecting a loan on the
basis of a review and analysis of the loan exhibits. HUD‘s guidance
sets forth experience and training requirements for underwriters and
requires a prospective MAP lender to submit the resumes of those
underwriters who will have responsibility for MAP loans. According to
HUD‘s guidance, the resumes must demonstrate that these individuals
have at least 3 years of recent experience in underwriting multifamily
housing loans and have underwritten at least three loans that were
funded. In evaluating a prospective MAP lender, the Lender
Qualifications and Monitoring Division within HUD‘s Office of
Multifamily Housing is required to review the resumes and approve those
underwriters who meet the requirements. In addition, HUD‘s multifamily
field offices may subsequently approve additional underwriters who are
qualified.
Lenders frequently have more than one individual who is authorized to
underwrite loans. Thus, HUD approved a total of 81 underwriters for the
20 lenders we reviewed. [Footnote 8] We found, however, that HUD
sometimes approved underwriters without having a sufficient basis for
determining whether the underwriters met the qualification requirements
of the MAP program. Specifically, the resumes for 22 of the 81
underwriters did not provide clear evidence of at least 3 years of
recent underwriting experience; and the resumes for 30 did not provide
evidence of 3 funded loans. Furthermore, 11 of the resumes did not
provide clear evidence that either requirement had been met. (See fig.
2.)
Figure 2: Percentage of Underwriters Whose Resumes Did Not Demonstrate
that They Met Qualifications for the MAP Program:
[See PDF for image]
This figure is a vertical bar graph. The vertical axis of the graph
represents percentage of underwriters from 0 to 50. The horizontal axis
of the graph represents qualification standard not demonstrated. The
following data is approximated from the graph:
Qualification standard not demonstrated: 3 years of experience;
Percentage of underwriters: approximately 27%.
Qualification standard not demonstrated: 3 funded loans;
Percentage of underwriters: approximately 36%.
Qualification standard not demonstrated: 3 years of experience or 3
funded loans;
Percentage of underwriters: approximately 12%.
Source: GAO‘s analysis of resumes for 81 MAP underwriters approved by
HUD.
[End of figure]
In some cases, the resumes showed some underwriting experience but
less than 3 years of experience. In other cases, the resumes cited
experience only in loan administration, processing, or origination”
activities that can encompass a range of duties that may or may not
involve significant underwriting responsibilities. Although some HUD
officials told us that they knew from first-hand knowledge that the
underwriters met HUD‘s experience standards, others indicated that they
were not aware of the standards, had applied the standards loosely, or
had drawn inferences about the underwriters‘ qualifications without
knowing whether these inferences were accurate. By not applying the
qualifications standards in a strict and consistent manner, HUD
increases its chances of insuring loans underwritten by individuals who
lack sufficient expertise in evaluating financial risk.
HUD‘s guidance states that in addition to having proper experience, an
underwriter must attend a MAP training session before submitting a
mortgage insurance application to HUD. The main objective of the
training is to familiarize the underwriter with the MAP process and the
roles and responsibilities of both the lender and HUD under this
process. HUD‘s multifamily field offices are responsible for ensuring
that the underwriters who submit insurance applications have met the
training requirement. During our visits to HUD‘s multifamily field
offices, we reviewed 35 loans submitted by 22 separate underwriters.
Our review of HUD‘s training records indicated that only 10 of the 22
underwriters attended MAP training. Without proper assurance that
underwriters are trained, HUD increases the likelihood that MAP
underwriters will not be familiar with the program‘s requirements and
will make errors that increase HUD‘s review time and insurance risk.
Field office officials acknowledged that they did not always verify
whether underwriters had attended MAP training, citing incomplete local
training records and the absence of a nationwide list of trained
underwriters as factors that made this verification difficult. To help
address this problem, the Lender Qualifications and Monitoring Division
in January 2002 developed a nationwide list of trained underwriters. In
addition, the division director told us that better attendance records
would be kept at future MAP training sessions.
HUD inconsistently applied its qualifications standards for the
underwriters we reviewed largely because of a lack of clear guidance.
For example, HUD‘s guidance for approving underwriters does not clearly
define the meaning of ’underwriting experience.“ As a result, the HUD
officials responsible for approving the underwriters interpreted the
guidance differently. One official, for example, said that work in ’loan
origination“ counted as underwriting experience; another official said
it did not, because loan origination focuses on the marketing of loans.
Similarly, another official told us that he counted property appraising
as underwriting experience; another did not. In addition, although HUD‘s
guidance authorizes the multifamily field offices to approve MAP
underwriters, that portion of the guidance does not cite the specific
requirements of 3 years of experience and three funded loans.
Accordingly, staff at four of the eight field offices we visited told
us they were not aware of these standards.
HUD Did Not Require Quality Control Plans as a Condition of MAP
Approval:
According to HUD‘s regulations, all FHA-approved lenders must implement
a written quality control plan. A quality control plan is an important
internal control mechanism because it sets forth a program of
independent review designed, among other things, to ensure compliance
with HUD‘s requirements and to prompt corrective actions when
deficiencies are found. For example, a quality control plan may require
a lender to have a certain percentage of its loans reviewed either by
external auditors or by individuals on the lender‘s staff who are
independent of the loan processing and underwriting functions.
Although HUD has implemented specific written standards for single-
family housing lenders‘ quality control plans, it has not done so for
lenders that make multifamily housing loans. According to the Director
of HUD‘s Lender Approval and Recertification Division”the office
responsible for granting lenders HUD-approved status”establishing the
standards had not been a high priority because, until the MAP program
was implemented, HUD retained primary responsibility for underwriting
the multifamily loans insured by FHA. He said that because of the lack
of standards, most lenders applying for HUD approval did not submit
quality control plans for their multifamily lending operations.
Accordingly, in our examination of the division‘s files we found a
multifamily quality control plan for 1 of the 20 lenders we reviewed.
Multifamily Housing officials told us that their decision not to
require a quality control plan as a condition of MAP approval was
influenced by several factors, including (1) the Department‘s lack of
standards for these plans, (2) the difficulty of developing standards
that would be suitable for both large and small lenders, and (3)
concerns that lenders would treat the plans as merely a paperwork
requirement. In our view, however, the MAP program‘s delegation of
greater underwriting responsibilities to lenders heightens the need for
lenders to implement quality control measures. Furthermore, these
problems could be overcome through consultation with large and small
lenders in developing quality control standards, and through the
Department‘s enforcement of these standards.
Processes and Procedures for Reviewing and Monitoring MAP Lenders‘
Underwriting of Loans Were Not Always Effectively Implemented:
HUD did not always comply with or effectively implement processes and
procedures for reviewing and monitoring MAP lenders‘ underwriting of
loans. HUD‘s procedures require field staff to conduct and document
reviews of lenders‘ mortgage insurance applications to ensure lenders‘
compliance with HUD‘s underwriting requirements before the loans are
insured. However, at the field offices we visited, we found that the
staff did not always properly document their reviews. Furthermore, the
field offices did not consistently ensure that lenders were adhering to
HUD requirements for property appraisals, a critical element of the loan
underwriting process. To some extent, the offices attributed these
problems to their heavy workloads. In addition to the field offices‘
reviews, HUD has established a quality assurance process to review
samples of loans after they have been approved for insurance. However,
HUD has not fully staffed the division responsible for this function.
Consequently, the division conducted significantly fewer reviews than it
could have done if it had been fully staffed, according to the division
director. In addition, the division has not developed written operating
procedures or a systematic process for analyzing the results of its
reviews.
Field Offices Did Not Properly Document Reviews:
HUD‘s guidance requires the multifamily field offices to perform reviews
of mortgage insurance applications and associated loan exhibits at both
the pre-application and firm commitment stages of the application
process. In conducting these reviews, a team of technical specialists,
known as a MAP team, is required to use standardized checklists that
delineate the specific areas the review should cover. The checklists are
designed to document the specialists‘ thorough review of the
application, approval or rejection of the application, and
recommendations to place conditions on the approval, if necessary.
After each stage of review, the team‘s supervisor, called the MAP team
leader, is required to prepare a memo to the field office‘s director
that summarizes the results of the technical reviews and provides a
recommendation to accept or reject the application. The memo should
also indicate whether the team leader rejected or modified the
recommendation of a technical reviewer. However, we found that field
staff did not always prepare these checklists and memos as required.
At the eight field offices we visited, we reviewed HUD‘s records for 35
new construction and substantial rehabilitation loans insured between
May 2000 and August 2001 to determine the field offices‘ compliance
with MAP review procedures. We found that the field staff did not
prepare one or more of the required review documents for 28 of the 35
loans we examined. Specifically, 12 of the cases were missing one or
more of the technical specialists‘ checklists, and 25 cases were
missing one or more team leader memos. (See table 1.) Furthermore, even
when the checklists were used, they were not always signed by the
reviewer or did not clearly indicate approval or rejection of the
application. Quality assurance reviews by the Office of Multifamily
Housing‘s Lender Qualifications and Monitoring Division have found
similar problems with the field offices‘ documentation of reviews.
Some field office staff told us these problems were attributable in some
cases to their lack of familiarity with the MAP program‘s documentation
requirements during the early stages of program implementation.
However, other staff said they did not have time to document their
reviews or did not think that use of the checklists and memos was
mandatory. Without proper documentation, however, HUD lacks adequate
assurance that technical staff are performing thorough reviews and that
team leaders‘ recommendations to approve insurance applications are
properly supported.
Table 1: Number of Loans Missing Required Review Documents:
Required review document: Technical review checklists;
Cases missing one or more documents: 12;
Cases with all documents on file: 23;
Total cases: 35.
Required review document: Team leader memos;
Cases missing one or more documents: 25;
Cases with all documents on file: 10;
Total cases: 35.
Source: GAO‘s review of HUD‘s documents for 35 MAP loans.
[End of table]
Field Offices Did Not Always Ensure Lenders‘ Compliance with HUD‘s
Requirements:
In conducting their reviews of MAP insurance applications, field staff
are expected to determine whether the lender complied with specific
underwriting requirements set forth in HUD‘s guidance. To determine the
extent to which the field offices ensured lenders‘ compliance, we
focused on HUD‘s requirements for property appraisals, a critical
component of loan underwriting. Among other things, HUD‘s guidance
indicates that an appraisal should (1) use rent and expense information
from at least three comparable properties as a basis for estimating the
expected rental income and operating expenses of the subject property;
(2) update the operating expense estimate for the subject property to
the date of the appraisal; (3) account for comparable properties‘
occupancy rates and rent concessions”factors that affect rental
income”in estimating income for the subject property; and (4) be no
more than 120 days old at the time the mortgage insurance application
reaches the firm commitment stage. Despite this guidance, however, for
the 35 loans we reviewed, we found that the field offices did not
always ensure lenders‘ compliance with these requirements. The Lender
Qualifications and Monitoring Division has also found problems with
appraisals, as well as deficiencies in other aspects of the loan
underwriting.
Among other things, the appraisal estimates the income (generated
primarily from rents) and operating expenses of the property being
insured, or ’subject“ property. As a basis for these estimates, the
appraiser uses rent and expense data from existing properties”known as
comparable properties”that are as similar as possible to the subject
property in size, location, age, and other characteristics. Because no
two properties are identical, the appraiser must make adjustments to
these rent and expense data to account for differences between the
comparable properties and the subject property, and must use the
adjusted data as a basis for making estimates regarding the subject
property. These estimates are important because a property‘s net income
(that is, gross income minus expenses) is a major factor in determining
the size of the mortgage the property can support and HUD will insure.
In general, the higher a property‘s net income, the larger the mortgage
it can qualify for.
In accordance with HUD‘s guidance, we found that the appraisals for all
35 loans provided rent and expense data from at least three comparable
properties as a basis for estimating the subject property‘s rental
income and operating expenses. In addition, we found that the rent data
in the appraisal were consistent with other data sources, [Footnote 9]
and that these data supported the rental income estimate for the
subject property. However, the same did not always hold true for the
expense data and operating expense estimates. To corroborate the
appraisal‘s expense data for the comparable properties, we used HUD‘s
Financial Assessment Subsystem”-a database containing audited financial
statements for all HUD-insured and –assisted properties. [Footnote 10]
The appraisals for 10 of the 35 loans we reviewed used one or more
comparable properties that were HUD-insured or –assisted and for which
corresponding expense information was available in HUD‘s database.
[Footnote 11] In 9 of the 10 cases, we found that the appraisals cited
lower expenses for the comparable properties than did the corresponding
information in the database. [Footnote 12] The appraisals‘
understatement of expenses for the comparable properties ranged from
about $28,000 to $270,000 per year. This situation is problematic
because an underestimation of expenses can lead to an overestimation of
net income and approval of a higher mortgage amount than the property
can support. The field office staff who reviewed the appraisals told us
that they had not been aware of these discrepancies for most of the
properties and, in any event, felt that the operating expense estimates
for the subject properties were reasonable based on their experience
and knowledge as professional appraisers. However, they also
acknowledged that appraisers sometimes made estimates that were not
well supported by expense data from comparable properties, as required,
and that this practice raised questions about the quality of the
appraisals. Some field office staff said they did not try to
corroborate the expense data for the comparable properties against
information in HUD‘s database because this was not a required part of
their review and they did not have time to do it. Similarly, Office of
Multifamily Housing officials told us that the field offices should not
be performing this task because to do so would overstep HUD‘s role in
relation to the lenders under the MAP program. However, given that HUD,
and not the lender, bears the financial risk of a MAP loan, HUD should
take reasonable steps to protect its financial interests. Given the
importance of the subject property‘s estimated operating expenses in
determining the mortgage amount that HUD insures, HUD would be prudent
to use data in its Financial Assessment Subsystem to help ensure that
the estimate is based on accurate information.
According to HUD‘s guidance, the operating expense estimate for the
subject property should be updated by the lender to the date of the
appraisal. The updating procedure involves the application of an
inflation rate to account for the age of the data used to develop the
expense estimate. For example, if the data are current as of January 1,
1999 (known as the data‘s ’effective date“), and the appraisal is
conducted in January 1, 2001, the expense estimate should be adjusted
upward to reflect 2 years of inflation. However, for 27 of the 35 loans
we reviewed, we found that the lender did not properly update the
expense estimate, and the field office did not require the lender to
correct the error. As a result, the operating expense estimates for 9
of these loans were 5 to 9 percent lower than if the updating procedure
had been done correctly. [Footnote 13] When a property‘s actual
operating expenses are higher than originally estimated, its ability to
support the mortgage may be weakened, thereby increasing HUD‘s
insurance risk. Some field staff told us they did not see a need to
correct the errors or inform the lenders of these problems because they
felt the magnitude of the understatement was too small to significantly
affect HUD‘s risk. However, Office of Multifamily Housing officials
told us that the operating expenses should always be updated. We also
found that some field staff were unclear on how to perform the updating
procedure because the instructions in MAP program guidance were vague.
The instructions for the updating procedure are located in both a
standard HUD appraisal form and in MAP program guidance. However,
unlike the form‘s instructions, the MAP guidance does not indicate that
the effective date of the expense data is the beginning date of the
fiscal year in which the expenses were accrued. [Footnote 14] When the
effective date used is not the beginning date of the fiscal year, the
time period for which the data are updated is shortened, resulting in
an understatement of the expense estimate for the subject property.
HUD‘s guidance also requires that the appraisal account for the
comparable properties‘ occupancy rates and rent concessions in
estimating income for the subject property. Specifically, if the
occupancy rate for the comparable property is lower than the occupancy
rate estimated for the subject property, the guidance requires that a
downward adjustment be made to the comparable property‘s rent to
reflect this difference. Similarly, if a comparable property is
offering rent concessions (for example, first month‘s rent free), the
rent should again be adjusted downward. When these downward adjustments
are not made, the rental income for the subject property can be
overestimated, which, in turn, can lead to an overestimation of the
property‘s net income. Despite HUD‘s guidance, however, we found that
the appraisals for 11 of the 35 loans did not make adjustments to
account for lower occupancy rates at the comparable properties.
Furthermore, in 5 cases, no adjustments were made for rent concessions
at the comparable properties, even though these concessions were
mentioned in the appraisal reports. Although the adjustments in these
cases would have been minor and would not have affected the properties‘
net income, HUD‘s guidance does not make exceptions for such
situations. Moreover, none of this noncompliance was documented in the
field office‘s reviews of the appraisals. Field office staff told us
they generally did not bother documenting instances of minor
noncompliance or notifying the lender of such problems because (1) doing
so would make it more difficult for them to stay within the required
review time frames and (2) according to HUD‘s guidance, their role as
reviewers is to require lenders to correct only those underwriting
deficiencies that significantly affect HUD‘s insurance risk.
Finally, HUD guidance states that an appraisal should be no more than
120 days old at the time the lender‘s insurance application reaches the
firm commitment stage of HUD‘s review. When an appraisal is beyond the
120-day point, the guidance permits the lender to update the appraisal
in lieu of doing a new one. According to Office of Multifamily Housing
officials, the purpose of this requirement is to ensure that the
appraisal‘s conclusions reflect current market conditions. However, for
7 of the 35 loans we reviewed, the age of the appraisals exceeded 120
days and no update was submitted. Specifically, the 7 appraisals ranged
from 121 to 251 days old at the firm commitment stage. HUD field office
officials told us that they accepted the appraisals without an update
because, to their knowledge, market conditions had not changed since
the time the appraisal was originally performed.
The Lender Qualifications and Monitoring Division has found similar
appraisal deficiencies that were not identified during the field
office‘s review. These problems included situations where operating
expense estimates were not properly updated, rent concessions were not
accounted for in estimating income, and the appraisal was over 120 days
old. The division has also found deficiencies with other aspects of the
field offices‘ review, including mortgage credit and architectural
problems. These problems included unauthorized financial relationships
between borrowers and lenders and noncompliance with building
accessibility requirements for the disabled.
Field Offices‘ Workloads Often Exceeded HUD‘s Standard:
As previously noted, field office staff cited workload and time
constraints as major reasons for some of the implementation problems we
found. In addition, some field office managers told us that they needed
additional staff to handle their assigned workload. HUD‘s risk
assessment for the MAP program [Footnote 15] concluded that a MAP team
should be able to review up to four mortgage insurance applications at
a time and still meet required processing timeframes. To compare the
teams‘ workloads against this standard, we determined the number of
applications that each MAP team was reviewing [Footnote 16] at the time
of our visits to the eight field offices. Because two of the field
offices had two MAP teams apiece, we reviewed a total of 10 teams. As
shown in figure 3, we found that 9 of the 10 teams were reviewing more
than four applications. For these 9 teams, the number of applications
ranged from 5 in Denver and San Francisco to 10 in Baltimore and
Phoenix.
Figure 3: MAP Team Workloads at Time of GAO‘s Visits Compared with HUD‘s
Standard:
[See PDF for image]
This figure is a vertical bar graph. The vertical axis of the graph
represents workloads from 0 to 10. The horizontal axis represents ten
MAP Teams. The following data is depicted:
MAP Team: Baltimore;
Workload: 10;
HUD standard: 4.
MAP Team: Chicago;
Workload: 6;
HUD standard: 4.
MAP Team: Cleveland;
Workload: 3;
HUD standard: 4.
MAP Team: Denver team 1;
Workload: 5;
HUD standard: 4.
MAP Team: Denver team 2;
Workload: 5;
HUD standard: 4.
MAP Team: Fort Worth;
Workload: 7;
HUD standard: 4.
MAP Team: Phoenix;
Workload: 10;
HUD standard: 4.
MAP Team: San Antonio;
Workload: 8;
HUD standard: 4.
MAP Team: San Francisco 1;
Workload: 5;
HUD standard: 4.
MAP Team: San Francisco 2;
Workload: 5.
HUD standard: 4.
Source: GAO‘s analysis of data from HUD‘s multifamily field offices.
[End of figure]
Office of Multifamily Housing officials told us that they were aware
that some of the field offices had heavy workloads. To address this
problem, the officials said that to a limited extent, they had shifted
some of this work to staff in field offices with smaller workloads.
However, they also acknowledged that as the MAP program grows, they
might have to take this action more frequently to balance the workload
among the field offices.
HUD Has Not Fully Staffed and Developed Its Quality Assurance Function:
In its risk assessment of the MAP program, HUD emphasized the
importance of establishing a quality assurance process. The risk
assessment indicated, among other things, that quality assurance efforts
would promote lenders‘ compliance with program requirements. However,
HUD has not fully implemented its quality assurance process.
Specifically, although the Lender Qualifications and Monitoring
Division is tasked with implementing this process, it has not (1)
achieved its intended staffing level, (2) developed and implemented
formal operating procedures, or (3) effectively used the results of its
reviews to improve lenders‘ underwriting of loans.
In developing the MAP program, HUD recognized that it had not committed
sufficient resources to lender monitoring in the past. Despite this
recognition, the Department has not fully staffed its Lender
Qualifications and Monitoring Division, which is tasked with performing
quality assurance reviews of loans already approved for FHA insurance.
The division‘s staffing plan envisioned that the reviews would be
conducted by 15 field-based staff divided into three teams. However, as
of March 2002”almost 2 years after the MAP program‘s inception”only 4 of
the 15 positions had been filled. Although the division performed 24
quality assurance reviews in fiscal year 2001, it had to bring in
volunteers from other HUD headquarters and field offices to assist in
this work. The division director indicated that the volunteers were not
as productive as the permanent staff because they were only temporary
and lacked experience in performing reviews. Furthermore, he estimated
that with 15 permanent full-time staff, the division could have
conducted 75 reviews. The Department has taken steps to deal with the
vacant field positions; in February 2002, the division received
approval from HUD‘s Office of the Deputy Assistant Secretary for
Multifamily Housing to fill its staff vacancies. According to HUD
officials, the Department will begin hiring for these positions in May
2002, but has not established a target date for filling all of the
vacancies. The division also has a vacancy in a headquarters position
slated to assist the division director with his responsibilities.
However, an Office of Multifamily Housing official told us there was no
plan to fill the position until other staffing needs in Multifamily
Housing were addressed.
According to the division director, these staffing problems have
contributed to delays in the division‘s development of written operating
procedures addressing, among other things, how quality assurance
reviews should be conducted and how loans and lenders should be
targeted for review. Without such procedures, the division cannot ensure
that its reviews are performed in a systematic and consistent manner and
that its resources are focused on loans and lenders that pose the
highest insurance risks to HUD. The division has been in the process of
drafting operating procedures since October 2000, but it has relied on
a series of individuals detailed from another part of Multifamily
Housing to complete this task. According to the division director,
turnover in these detailees, the fact that they are not directly
accountable to him, competing work priorities, and his lack of an
assistant have made it difficult for him to adequately supervise the
development of the procedures. At the time of our review, one of the
detailees was still working on the procedures but, according to the
director, did not have an estimated completion date.
A key objective of the quality assurance reviews is to improve the MAP
lender‘s underwriting of loans by conveying findings and
recommendations to the lenders through written reports and by
identifying serious or recurring underwriting deficiencies and program
violations that may require corrective action. In addition, the reviews
are also intended to evaluate the field office‘s compliance with
procedures for approving lenders‘ mortgage insurance applications under
the MAP program. However, the Lender Qualifications and Monitoring
Division is not fully meeting this objective because it has been slow
to communicate the results of its reviews to MAP lenders and field
offices and has done limited analysis of the results. For example,
during fiscal year 2001, staff completed 24 reviews and submitted draft
reports for all of these reviews to the division director for approval
and issuance. According to division field staff, conducting a review
and drafting the associated report takes about 2 weeks. However, as of
March 2002, the division had issued final reports for only 6 of the 24
reviews, even though all 18 of the remaining reviews had been conducted
over 6 months earlier. In two cases, the reviews were done over a year
earlier. According to the division director, the remaining draft
reports have not been finalized because he has not had time to review
them. However, by not issuing the reports, HUD is not providing lenders
and field offices with timely feedback on problems uncovered by these
reviews that may increase HUD‘s insurance risk. In addition, the
division has not developed a systematic process for aggregating and
analyzing the results of its reviews to identify patterns of
deficiencies. As a result, it has done limited analysis of the 24
completed reviews to identify recurring underwriting errors and program
violations committed by MAP lenders. Even these limited efforts
demonstrate the benefits of this kind of analysis. For example, the
division observed that several lenders had not, as required, determined
whether the properties HUD was insuring complied with accessibility
requirements mandated by the Fair Housing Act. Accordingly, the
division sent a notice to all MAP lenders reemphasizing the lenders‘
responsibility for ensuring compliance with the accessibility
requirements. However, further analysis of its reviews would be
difficult”particularly as the number of completed reviews
increases”without storing the results in an automated spreadsheet or
database.
HUD Has Held Some Lenders Accountable for Specific Violations, but Has
Had a Limited Basis for Identifying Lenders with Patterns of
Noncompliance:
To hold MAP lenders accountable for specific violations of program
requirements or for exhibiting patterns of noncompliance, HUD‘s Office
of Multifamily Housing can suspend or terminate their ability to
participate in the MAP program. Multifamily Housing has suspended some
MAP lenders for specific violations. In contrast, it has neither
terminated nor suspended any lenders for exhibiting patterns of
noncompliance, because weaknesses in its quality assurance process and
the newness of the MAP program have provided a limited basis for
identifying such patterns.
HUD Has Suspended Some Lenders for Specific Violations:
HUD‘s guidance allows the Office of Multifamily Housing to suspend or
terminate a lender‘s participation in the MAP program for specific
violations of program requirements. The type of penalty HUD imposes
against a lender depends on the severity of the violation and the
degree to which it affects HUD‘s financial risk. According to HUD‘s
guidance, violations that directly and adversely affect HUD‘s risk may
result in termination; violations that do not pose such a risk may
result in suspension.
As of March 2002, HUD had not terminated any MAP lenders, but it had
suspended three. Two of the three lenders were suspended because they
had prohibited financial relationships with the borrowers. The third
lender was suspended because it did not follow HUD‘s insurance
application process for health care facilities. Specifically, it
submitted mortgage insurance applications without first obtaining the
required HUD approval of the management agent of these facilities. The
duration of the suspensions range from 6 to 12 months. During the term
of their suspensions, these lenders are prohibited from submitting
additional mortgage insurance applications under the MAP program. The
suspensions do not affect insurance applications already being processed
by HUD‘s field offices. The three suspensions are a result of lender
noncompliance with MAP program requirements identified by Lender
Qualifications and Monitoring Division staff.
Multifamily Housing officials told us that taking enforcement actions
consumes considerable staff time and effort, partly because the actions
must be supported well enough to withstand potential court challenges by
the lenders. According to HUD officials, two of the three lenders that
HUD suspended have challenged the Department‘s actions in federal
district court. In one case, the lender ultimately withdrew its
challenge and served its suspension. In the other case, as of April
2002, the court had not made a ruling, according to Multifamily Housing
officials. The officials said they would continue to pursue enforcement
actions against MAP lenders that do not comply with HUD‘s requirements
because the success of the MAP program depends heavily on the integrity
of the participating lenders.
HUD Has Had a Limited Basis for Determining Any Patterns of
Noncompliance:
HUD‘s guidance emphasizes the importance of terminating or suspending
lenders that exhibit a pattern of noncompliance over several insurance
applications. According to the guidance, examples of noncompliance may
include:
* failure to provide required loan exhibits, or submission of
incomplete or inaccurate exhibits;
* lack of appropriate documentation and analysis for underwriting
conclusions;
* evidence that a lender‘s unsound underwriting resulted in the
assignment of an FHA-insured mortgage loan to HUD.
Reviews conducted by the Lender Qualifications and Monitoring Division
have revealed instances where lenders made underwriting errors,
including missing and inaccurate loan exhibits and inadequately
supported underwriting conclusions. However, as previously discussed,
the division has issued final reports for only a few of its quality
assurance reviews and lacks a systematic process for aggregating and
analyzing the results of its reviews. Consequently, HUD has had a
limited basis for identifying any patterns of noncompliance and, as of
March 2002, had not taken enforcement actions against lenders for
exhibiting such patterns. The newness of the MAP program has also
limited HUD‘s ability to identify patterns of deficiencies, because
patterns take time to emerge and may only become evident after HUD has
performed quality assurance reviews on several of a lender‘s loans.
Furthermore, because no MAP loans have been assigned to HUD so
far”partly a consequence of the young age of loans”-the Department has
no evidence that unsound underwriting practices are resulting in failed
loans.
Conclusions:
FHA insures several billion dollars in mortgages for multifamily housing
properties each year. Given the size of this financial commitment and
the MAP program‘s delegation of significant loan underwriting
responsibilities to lenders, it is important that HUD have sufficient
controls to mitigate the program‘s financial risks. Although HUD has
established processes and procedures for this purpose, it has not
always consistently or effectively implemented them. Weaknesses in
HUD‘s lender approval and monitoring efforts, in particular, underscore
the need for improvements in its oversight of MAP lenders.
HUD did not always ensure that the lenders it approved to participate in
the MAP program met HUD‘s qualification requirements for underwriters.
Because the Department‘s guidance does not provide clear standards for
assessing the experience of lenders‘ underwriters, HUD staff applied the
guidance inconsistently. In addition, HUD did not ensure that approved
underwriters attended required training sessions before submitting
insurance applications. When qualification standards are not clear and
strictly enforced, HUD increases the potential that MAP underwriters
will not be familiar with program requirements and will make errors
that could increase HUD‘s review time and insurance risk. Although the
success of the MAP program rests heavily on the quality of its
participating lenders, HUD did not require these lenders to implement
quality control plans and did not establish standards for these plans.
We believe that implementing such a requirement would help ensure that
MAP lenders have the necessary policies and procedures to prevent
underwriting deficiencies that could increase HUD‘s insurance risk.
HUD could improve its implementation of processes for reviewing and
monitoring MAP lenders‘ underwriting of loans. Because field office
staff did not always document their reviews of mortgage insurance
applications, as required, HUD lacked full assurance that the reviews
were thorough and that its decisions to insure loans were properly
supported. In addition, field staff did not enforce lenders‘ compliance
with some requirements for property appraisals, including those
designed to ensure that expense estimates for the property being
insured are accurate. These problems occurred, in part, because of
unclear guidance and heavy workloads. Because a property‘s income and
expenses are major factors in determining the size of the mortgage,
inaccurate estimates can increase HUD‘s risk of insuring mortgages that
are higher than what the property can support. The consequence of this
increased risk is higher potential program costs. Finally, HUD‘s
monitoring of lenders and field offices through quality assurance
reviews has several weaknesses. These weaknesses”including insufficient
staff, a lack of formal operating procedures, lengthy delays in issuing
reports, and minimal analysis of review results”have limited HUD‘s
ability to oversee the MAP program.
Recommendations for Executive Action:
To improve HUD‘s oversight of MAP lenders and to reduce the financial
risks assumed by FHA, we recommend that the Secretary of HUD direct
the Assistant Secretary for Housing-Federal Housing Commissioner to do
the following:
* Strengthen the process for approving MAP lenders by (1) issuing
guidance that clarifies HUD‘s experience requirements for MAP
underwriters and requires HUD staff to evaluate prospective MAP
underwriters against these standards; and (2) issuing guidelines that
establish standards for quality control plans and require MAP lenders
to develop and maintain these plans as a condition of continued
participation in the MAP program.
* Improve field offices‘ implementation of procedures for reviewing
mortgage insurance applications submitted by MAP lenders, by (1) holding
MAP team leaders accountable for preparing required review memos, and
for ensuring that HUD field office staff consistently use review
checklists in accordance with MAP guidance; (2) utilizing data in HUD‘s
Financial Assessment Subsystem to corroborate expense data for HUD-
insured or - assisted properties used as comparable properties in
appraisal reports; and (3) clarifying and enforcing HUD‘s requirement
for updating the operating expense estimate for a subject property to
the date of the appraisal.
* Strengthen the Lender Qualifications and Monitoring Division‘s
monitoring of lenders and HUD field offices, by (1) establishing a time
frame for finalizing and issuing written operating procedures that
include criteria for selecting loans and lenders for review that pose a
high insurance risk to the Department; (2) issuing written reports on
all quality assurance reviews conducted in fiscal year 2001 to the
cognizant MAP lenders and HUD field offices; and (3) developing a
process for aggregating and analyzing the results of quality assurance
reviews to identify patterns of underwriting deficiencies and program
violations by MAP lenders.
Agency Comments:
We provided HUD with a draft of this report for its review and comment.
HUD indicated that it agreed with each of the report‘s recommendations
and that it had begun taking actions to address them.
In response to our recommendations to strengthen the process for
approving MAP lenders, HUD said it (1) would centralize the authority
for the initial approval of MAP underwriters within HUD headquarters,
and would issue guidance to MAP lenders and HUD staff that clarifies
HUD‘s experience requirements for underwriters; and (2) was working
with the Mortgage Bankers Association of America to develop
requirements and standards for quality control plans for MAP lenders.
HUD also indicated that MAP lenders that failed to submit, maintain, or
operate in accordance with an acceptable quality control plan would be
removed from the program.
In response to our recommendations to improve field offices‘
implementation of procedures for reviewing mortgage insurance
applications submitted by MAP lenders, HUD indicated that it (1) had
instructed field office directors to ensure MAP team leaders‘ and
technical specialists‘ adherence to procedures for documenting reviews
of MAP insurance applications, and would issue a notice to the field
offices emphasizing the necessity of following these procedures; (2)
would begin using data in HUD‘s Financial Assessment Subsystem to
corroborate the expense data for HUD-insured properties used as
comparable properties in appraisal reports; and (3) would issue
guidance to MAP lenders detailing the correct method for updating a
property‘s operating expenses.
In response to our recommendations to strengthen the Lender
Qualifications and Monitoring Division‘s monitoring of lenders and HUD
field offices, HUD said it (1) had established a target date of
December 15, 2002, for issuing written procedures that include criteria
for selecting lenders and loans that pose a high insurance risk to HUD;
(2) would expedite the issuance of reports from quality assurance
reviews conducted in fiscal year 2001; and (3) was developing a
spreadsheet to aggregate and analyze findings from quality assurance
reviews. The full text of HUD‘s letter is presented in appendix I.
As arranged with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 15 days
after the date of this letter. At that time, we will send copies to the
Secretary of Housing and Urban Development. We will make copies
available to others on request. In addition, the report will be
available at no charge on the GAO Web site at [hyperlink,
http://www.gao.gov].
If you or your staff have any questions about this report, please call
me at (202) 512-7631. Key contributors to this report are listed in
appendix III.
Signed by:
Stanley J. Czerwinski:
Director, Physical Infrastructure Issues:
[End of section]
Appendix I: Comments from the Department of Housing and Urban
Development:
U.S. Department Of Housing And Urban Development:
Office Of The Assistant Secretary For Housing-Federal Housing
Commissioner:
Washington, D.C. 20410-8000:
June 19, 2002:
Mr. Stanley J. Czerwinski:
Director:
Physical Infrastructure Issues:
United States General Accounting Office:
Washington, DC 29548:
Dear Mr. Czerwinski:
We appreciate the opportunity to comment on the July 2002 draft of
GAO's report on Multifamily Housing Improvements Needed in HUD's
Oversight of Lenders that Underwrite FHA-Insured Loans (GAO-02-680),
hereafter called "the GAO report."
The GAO report reflected an excellent understanding of the procedures
under HUD's Multifamily Accelerated Processing (MAP) for FHA's
multifamily mortgage insurance programs. These comments do not question
the findings in the GAO report. Instead, HUD's specific comments are
devoted to the ways that HUD will implement the recommendations for
executive action in the GAO report.
We believe that the use of MAP assures a higher level of safety in
underwriting than existed before MAP. For one reason, MAP Lenders must
go through a strict approval process. Lenders without extensive
multifamily underwriting experience will not be approved. Second, MAP
established uniform standards of case review to be applicable in each
Multifamily Hub and Program Center. Prior to the implementation of MAP,
Hubs and Program Centers used "fast-track" procedures, which differed
from field office to field office, resulting in uneven application of
review procedures. Third, MAP has a monitoring staff which provides a
post-review sampling of MAP closed loans to help assure careful
underwriting by both Lenders and HUD staff.
We are giving particular attention to the insurance on health care
facilities. There are now new MAP requirements insuring an extra level
of review of MAP underwriters who underwrite health care facilities,
and there are detailed additional requirements for owners who seek to
finance or refinance 11 or more of these projects with a total of $75
million, or more.
Design of MAP was based on the well established and proven multifamily
underwriting systems of the Federal Home Loan Mortgage Corporation
(Freddie Mac). and the Federal National Mortgage Association (Fannie
Mae), both of which utilize a limited number of experienced lenders.
MAP is more closely aligned to the Freddie Mac system, wherein the
final approval is retained by Freddie Mac. Fannie Mae allows the lender
to make this approval, but requires the lender to risk-share losses.
Obtaining high quality loan applications depends on efficient
processing. Processing of all multifamily insurance under the
traditional FHA method resulted, in some field offices, in delays of as
much as a year from application to closing. Allowing the Lenders to
prepare and review many of the application documents under MAP made a
sizeable difference in processing time. A condition of Lender
application preparation and review is careful review of the Lender's
actions by the HUD staff.
We are confident that the review of MAP loans has been, and will
continue to be, more than adequate to protect the FHA insurance fund.
The GAO report, nevertheless, is particularly helpful in pointing out
areas of review where greater care or additional documentation of
actions taken is needed. The specific comments that follow explain the
steps we have taken. or intend to take, to implement the GAO
recommendations.
Recommendation:
Strengthen the process for approving MAP lenders by (I) issuing
guidance that clarifies HUD's experience requirements for MAP
underwriters and requires HUD staff to evaluate prospective MAP
underwriters against these standards and (2) issuing guidelines that
establish standards for quality control plans and require MAP lenders
to develop and maintain these plans as a condition of continued
participation in the MAP program.
HUD's Response:
The Department accepts the GAO recommendation to issue guidance that
clarifies HUD's experience requirements for MAP underwriters and
requires HUD staff to evaluate prospective MAP underwriters against
these standards. We will issue a Mortgagee Letter providing this
guidance. Furthermore, it is our intention to remove the Field Office
authority to initially approve a MAP Lender's underwriter. In the
future, only HUD Headquarters will be authorized to approve a MAP
Underwriter. We estimate this task will be completed by October 15,
2002.
The Department accepts the GAO recommendation to issue guidelines that
establish standards for MAP Lender quality control plans and require
MAP lenders to develop and maintain these plans as a condition of
continued participation in the MAP program. We asked the Mortgage
Bankers Association of America (MBA) to establish a working group to
recommend to the Department standards for quality control plans. The
group has met and has a series of questions/discussion points for us to
consider. Once the standards are developed, a Mortgagee Letter will be
issued requiring that the standards be used in developing quality
control plans. MAP Lenders will be required to submit a quality control
plan based on these standards to the Department. Once the plan is
approved by HUD, the MAP Lender will be required to maintain and
operate it in accordance with its elements. Those MAP Lenders failing
to submit, maintain, or operate in accordance with an acceptable
quality control plan will be removed from the program. We estimate the
task of promulgating the Mortgagee Letter will be completed by November
15, 2002.
Recommendation:
Improve field offices' implementation of procedures for reviewing
mortgage insurance applications submitted by MAP lenders by (1) holding
MAP team leaders accountable for preparing required review memos and
for ensuring that HUD field office staff consistently use review
checklists in accordance with MAP guidance, (2) utilizing data in HUD's
Financial Assessment Subsystem to corroborate expense data for HUD-
insured or assisted properties used as comparable properties in
appraisal reports, and (3) clarifying and enforcing HUD's requirement
for updating the operating expense estimate for a subject property to
the date of the appraisal.
HUD's Response:
The Department accepts the GAO recommendation of holding MAP team
leaders accountable for preparing required review memos and for
ensuring that HUD field office staff consistently use review checklists
in accordance with MAP guidance. To reinforce the importance that we
place on performing these actions, the Department has taken the
following steps:
* The Department held a meeting for the HUD Multifamily Hub Directors
in Washington, DC, May 21 through 23, 2002. During this meeting, the
Headquarters staff shared the preliminary GAO draft MAP findings with
the Hub Directors. The Directors also were given a refresher course on
the MAP HUD review documentation procedures. They were instructed to
take actions to ensure that all Team Leader memos and technical
specialist review checklists were completed in accordance with the MAP
Guide.
* The Department held several video teleconferencing sessions (PicTel
broadcasts) with small groups of Hubs and their respective Program
Center MAP staff. In each of these sessions, the GAO preliminary draft
findings were reviewed and completion of the memoranda and checklists
was mandated of Team Leaders and technical staff participating in these
sessions. The PicTel broadcasts with all of the Hubs and Program
Centers were conducted between May 30 and June 14, 2002.
* A Housing Notice will be published in the coming weeks and sent to
the HUD field offices emphasizing the necessity of filing timely
reports, memoranda and checklists on a consistent basis in accordance
with the MAP Guide and Supplements. It will address the GAO findings
and remind Team Leaders and technical staff of their responsibility to
document MAP reviews in accordance with established policy.
The Department accepts the GAO recommendation of utilizing HUD's
Financial Assessment Subsystem data to corroborate the expense data for
HUD-insured properties used on comparable properties in appraisal
reports. The Department has begun the process of assigning passwords to
multifamily appraisers throughout HUD field offices to give them access
to the Financial Assessment Subsystem. While not all data may be
compatible on a line for line basis, we expect full field utilization
will be completed by August 30, 2002 for intermediate groupings of
items such as total utility costs and total maintenance costs.
The Department accepts the GAO recommendation of enforcing the
requirement for updating the operating expense estimate for a subject
property to the date of the appraisal in accordance with the specific
instructions contained in the MAP Guide. Accordingly, we have informed
the Hub Directors to direct their staff to ensure that comparable
expenses are appropriately updated in the process of deriving total
estimated project expenses for MAP appraised properties. This was one
of several items covered in the Hub Directors conference in May, during
the PicTel broadcasts with field staff, and it will be covered again in
a forthcoming Mortgagee Letter to all MAP Approved Lenders detailing
the correct method of updating comparable expenses for all third party
appraiser contractors.
Recommendation:
Strengthen the HUD Multifamily Development, Lender Qualifications and
Monitoring Division's (LQMD) monitoring of lenders and HUD field
offices by (1) establishing a time frame for finalizing and issuing
written operating procedures that include criteria for selecting loans
and lenders for review that pose a high insurance risk to the
Department, (2) issuing written reports on all quality assurance
reviews conducted in fiscal year 2001 to the cognizant MAP lenders and
HUD field offices, and (3) developing a process for aggregating and
analyzing the results of quality assurance reviews to identify patterns
of underwriting deficiencies and program violations by MAP lenders.
HUD's Response:
The Department accepts GAO's recommendation to establish a time frame
for finalizing and issuing written operating procedures that include
criteria for selecting loans and lenders for review that pose a high
insurance risk to the Department. We have established a completion date
of December 15, 2002 for this monitoring guide.
The Department accepts the GAO recommendation to issue written reports
on all quality assurance reviews conducted in fiscal year 2001 to the
cognizant MAP lenders and HUD field offices. As of June 19, 2002,
fourteen LQMD Reports from FY 2001 remain to be finalized and issued.
The Department expects to issue the remaining reports at a pace of two
reports a week. Since February 2002, the LQMD team leaders send the
draft report to the Hub/Program Center Director for review and comment.
The Director is given 30 days to respond to the report, and the
Director's comments are considered in the final report.
The Department accepts the GAO recommendation to develop a process for
aggregating and analyzing the results of quality assurance reviews to
identify patterns of underwriting deficiencies and program violations
by MAP lenders. LQMD is developing an Excel generated spreadsheet to
aggregate and analyze the findings from LQMD monitoring reports. We
will be able to analyze these findings by MAP Lender, MAP Underwriter
or type of finding.
We appreciate your comments and recommendations.
Sincerely,
Signed by:
John C. Weicher:
Assistant Secretary for Housing - Federal Housing Commissioner:
[End of section]
Appendix II: Objectives, Scope, and Methodology:
Our objectives were to answer the following questions: (1) How well does
the Department of Housing and Urban Development (HUD) ensure that
lenders participating in the Multifamily Accelerated Processing (MAP)
program meet HUD‘s qualification requirements? (2) How well is HUD
implementing processes for reviewing and monitoring MAP lenders‘
underwriting of loans? (3) Has HUD held any MAP lenders accountable for
noncompliance with program requirements?
To determine how HUD ensures that MAP lenders meet HUD‘s qualifications
requirements, we reviewed HUD‘s regulations, guidance, and procedures
relating to its process for approving lenders to participate in the MAP
program. We interviewed officials from HUD‘s Office of Lender
Activities and Program Compliance, the Office of Multifamily Housing‘s
Lender Qualifications and Monitoring Division, and multifamily field
offices in Baltimore, Chicago, Cleveland, Denver, Ft. Worth, Phoenix,
San Antonio, and San Francisco. To assess how HUD implemented its
process for approving MAP lenders, we focused on the 20 lenders that
made the 35 new construction and substantial rehabilitation loans
insured under the MAP program by the eight field offices between May
2000 and August 2001. For each of the 20 lenders, we reviewed its
application and supporting documents for MAP approval; comments
solicited from the field offices about it; and HUD‘s records showing
the approval of the lender and its underwriters for participation in
the program. In addition, we used information from HUD‘s F47
database”which provides current and historical information on the
multifamily mortgage loans that FHA insures”to verify that the lenders
reported all of their FHA-insured loans made during the previous 5
years that were assigned to HUD. We also examined HUD‘s training
records to determine whether the 22 underwriters who underwrote the 35
loans we reviewed had received MAP program training. Finally, to
determine whether HUD had obtained quality control plans from the
lenders, we reviewed files maintained by the Department‘s Lender
Approval and Recertification Division.
To determine how well HUD implemented processes for reviewing and
monitoring MAP lenders‘ underwriting of loans, we reviewed HUD‘s
guidance and procedures for the field offices‘ review and approval of
mortgage insurance applications. We also interviewed officials from
HUD‘s Office of Multifamily Housing and each of the eight field offices
we visited regarding how the reviews are conducted and documented, as
well as workload and staffing issues. To assess how HUD implemented the
application review process, we focused on the 35 new construction and
substantial rehabilitation loans insured under the MAP program by the
eight field offices between May 2000 and August 2001. For each of these
cases, we reviewed the lender‘s mortgage insurance application and
associated underwriting exhibits and documentation of HUD‘s review and
approval of the applications, including review checklists and team
leader memos. To assess the extent to which the field offices ensured
lenders‘ compliance with HUD‘s underwriting requirements, we focused on
four requirements for property appraisals, a critical aspect of loan
underwriting. Specifically, we determined whether the appraisals: 1)
used rent and expense information from at least three comparable
properties as a basis for estimating the expected rental income and
operating expenses of the subject property; 2) updated the expense
estimate for the subject property to the date of the appraisal; 3)
accounted for the comparable properties‘ occupancy rates and rent
concessions in estimating rental income for the subject property; and
4) were no more than 120 days old at the time the insurance application
reached the firm commitment stage. In making these determinations, we
corroborated the rent data used in the appraisals using information in
apartment rental guides and Web sites and by contacting apartment
leasing offices. Similarly, we corroborated expense data for HUD-
insured or -assisted properties used in the appraisals against audited
financial statements in HUD‘s Financial Assessment Subsystem. We
discussed our findings with the field office staff responsible for
reviewing the appraisals. Also, we compared the field offices‘
workloads at the time of our visits against the workload standard
set forth in HUD‘s risk assessment for the MAP program. In addition, we
reviewed the results of reviews conducted by the Lender Qualifications
and Monitoring Division to identify underwriting deficiencies uncovered
by HUD‘s quality assurance process. To determine how well HUD monitored
lenders and field offices through its quality assurance process, we
interviewed officials from the Office of Multifamily Housing and its
Lender Qualifications and Monitoring Division to discuss how the
division conducts its reviews. In addition, we compared the division‘s
planned staffing level with its actual level as of March 2002. We
obtained data on the number and status of quality assurance reviews
that the division planned and conducted in fiscal year 2001 and the
number of these reviews for which the division issued reports to the
cognizant MAP lenders and field offices.
To determine whether HUD has held any MAP lenders accountable for
noncompliance with program requirements, we reviewed HUD‘s regulations
and guidance to determine the enforcement options available to HUD. We
interviewed officials from HUD‘s Office of Multifamily Housing to
discuss the enforcement actions that had been taken against MAP lenders
as of March 2002. We also reviewed documentation regarding the specific
circumstances that led to these actions.
We tested the data we obtained from HUD for reasonableness and
completeness and found them to be reliable for the purpose of our
analyses. In addition, we reviewed existing information about the
quality and controls supporting the data systems and discussed the data
we analyzed with agency officials to ensure that we interpreted them
correctly.
We conducted this review from April 2001 through April 2002 in
accordance with generally accepted government auditing standards.
[End of section]
Appendix III: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Stanley J. Czerwinski, (202) 512-2834:
Charles E. Wilson, Jr., (202) 512-2834:
Staff Acknowledgments:
In addition to those named above, Mark Egger, Tiffani Green, Rick Hale,
Laura Hogshead, Donna Leiss, Bill McDaniel, John McGrail, Andy
O‘Connell, Jerry Patton, Rose Schuville, Stewart Seman, Jim Vitarello,
Wendy Wierzbicki, and Steve Westley made key contributions to this
report.
[End of section]
Footnotes:
[1] U.S. General Accounting Office, Single-Family Housing: Stronger
Oversight of FHA Lenders Could Reduce HUD‘s Insurance Risk, GAO/RCED-00-
112 (Washington, D.C.: Apr. 28, 2000).
[2] The credit subsidy cost is the net present value of the estimated
long-term costs to the federal government of extending or guaranteeing
credit, calculated over the life of the loan and excluding
administrative costs. Budget authority is the authority provided by law
to enter into financial obligations that will result in immediate or
future outlays involving federal funds. HUD‘s process for estimating
credit subsidy costs is discussed in U.S. General Accounting Office,
Multifamily Housing Finance: Funding FHA‘s Subsidized Credit Programs,
GAO-02-323R (Washington, D.C.: Feb. 1, 2002).
[3] HUD‘s policy is to attempt to restore the financial soundness of
the mortgage through a workout plan. If a workout plan is not feasible,
HUD may, as a last resort, foreclose on the mortgage.
[4] The actual claim payment may reflect dollar amounts added to or
subtracted from the unpaid principal balance of the loan. For example,
any mortgage insurance premiums the lender paid to HUD after the date
of loan default are added to the unpaid principal balance.
[5] The programs included under MAP are Section 220 (construction or
rehabilitation of rental housing for urban renewal and concentrated
development areas), Section 221(d)(3) (construction or substantial
rehabilitation of rental and cooperative housing with nonprofit or
cooperative borrowers), Section 221(d)(4) (construction or substantial
rehabilitation of rental and cooperative housing with for-profit
borrowers), Section 223(f) (refinancing or acquisition of existing
rental housing), Section 232 (construction or substantial
rehabilitation of nursing homes, intermediate care, board and care, and
assisted-living facilities), and Section 232/223(f) (refinancing or
acquisition of existing nursing homes, intermediate care, board and
care, and assisted living facilities).
[6] Insurance applications for refinancing and acquisition loans start
at the firm commitment stage.
[7] HUD does not require certain lenders, known as ’supervised“
lenders, to submit financial statements. A supervised lender is a
financial institution that is a member of the Federal Reserve System or
an institution whose accounts are insured by the Federal Deposit
Insurance Corporation or the National Credit Union Administration.
[8] Seventy-three of the underwriters were approved by the Office of
Multifamily Housing, while the remaining eight were approved by the
multifamily field offices.
[9] We corroborated the rents for the comparable properties by checking
apartment rental guides and Web sites and by contacting apartment
leasing offices.
[10] According to HUD officials, expense data for non-HUD properties
are not readily available because property owners consider the data to
be proprietary business information.
[11] The appraisals for two other loans used HUD-insured nursing homes
as comparable properties. However, according to Multifamily Housing
officials, expenses for nursing homes and other health care facilities
are accounted for differently in appraisal reports than they are in the
financial statements in HUD‘s database. As a result, the expense data
from these two sources are not comparable.
[12] In the remaining case, the expenses cited in the appraisal were
higher than those reflected in the database.
[13] For the remaining 18 loans, the estimates were understated by less
than 5 percent.
[14] For example, for expenses accrued during a fiscal year running
from May 1, 2000, through April 30, 2001, the effective date of the
corresponding expense data would be the beginning date of that fiscal
year, or May 1, 2000.
[15] HUD‘s guidance requires the Department to conduct risk assessments
of new or substantially revised programs. The risk assessments are
documented reviews by HUD management of a program‘s susceptibility to
waste, fraud, abuse, and mismanagement.
[16] In determining this number, we counted all mortgage insurance
applications that were in either the pre-application or firm commitment
stage of review at the time of our visits. We visited the Cleveland,
San Francisco, Denver, Ft. Worth, and San Antonio field offices in
October 2001, and the Chicago, Phoenix, and Baltimore field offices in
November 2001.
[End of section]
GAO‘s Mission:
The General Accounting Office, the investigative arm of Congress,
exists to support Congress in meeting its constitutional
responsibilities and to help improve the performance and accountability
of the federal government for the American people. GAO examines the use
of public funds; evaluates federal programs and policies; and provides
analyses, recommendations, and other assistance to help Congress make
informed oversight, policy, and funding decisions. GAO‘s commitment to
good government is reflected in its core values of accountability,
integrity, and reliability.
Obtaining Copies of GAO Reports and Testimony:
The fastest and easiest way to obtain copies of GAO documents at no
cost is through the Internet. GAO‘s Web site [hyperlink,
http://www.gao.gov] contains abstracts and fulltext files of current
reports and testimony and an expanding archive of older products. The
Web site features a search engine to help you locate documents using
key words and phrases. You can print these documents in their entirety,
including charts and other graphics.
Each day, GAO issues a list of newly released reports, testimony, and
correspondence. GAO posts this list, known as ’Today‘s Reports,“ on its
Web site daily. The list contains links to the full-text document
files. To have GAO e-mail this list to you every afternoon, go to
[hyperlink, http://www.gao.gov] and select ’Subscribe to daily E-mail
alert for newly released products“ under the GAO Reports heading.
Order by Mail or Phone:
The first copy of each printed report is free. Additional copies are $2
each. A check or money order should be made out to the Superintendent
of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or
more copies mailed to a single address are discounted 25 percent.
Orders should be sent to:
U.S. General Accounting Office:
441 G Street NW, Room LM:
Washington, D.C. 20548:
To order by Phone:
Voice: (202) 512-6000:
TDD: (202) 512-2537:
Fax: (202) 512-6061:
To Report Fraud, Waste, and Abuse in Federal Programs Contact:
Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]:
E-mail: fraudnet@gao.gov:
Automated answering system: (800) 424-5454 or (202) 512-7470:
Public Affairs:
Jeff Nelligan, managing director, NelliganJ@gao.gov:
(202) 512-4800:
U.S. General Accounting Office:
441 G Street NW, Room 7149:
Washington, D.C. 20548:
