The Office of the Inspector General (OIG) has released an audit of the Federal Housing Administration’s (FHA) monitoring and payment of single-family conveyance claims, finding that HUD paid claims for an estimated 239,000 properties that servicers did not foreclose upon or convey on time.
The review was initiated due to concerns that HUD was overpaying servicers’ claims for FHA insurance benefits.
“HUD paid an estimated $141.9 million for servicers’ claims for unreasonable and unnecessary debenture interest that was incurred after the missed foreclosure or conveyance deadline and an estimated $2.09 billion for servicers’ claims for unreasonable and unnecessary holding costs that were incurred after the deadline to convey,” the audit report stated. “While it was reasonable for servicers to pay costs to preserve the property and complete the foreclosure process, it was unnecessary and unreasonable for HUD to pay for such costs after the date the servicer was required to convey.”
Claims would have been reduced if servicers conveyed on time.
The OIG recommended for HUD to amend 24 C.F.R. Part 203, which corrects deficiencies that allowed an estimated $2.23 billion in unreasonable and unnecessary costs to the FHA insurance fund.
“These changes include a maximum period for filing insurance claims and disallowance of expenses incurred beyond established timeframes,” the report continues. “We recommend that HUD develop a strategic information technology plan to make significant operational changes to HUD’s monitoring of single-family conveyance claims to ensure that servicers comply with foreclosure and conveyance timeframes. We also recommend that HUD develop and implement controls to identify noncompliance with current regulations at 24 C.F.R. 203.402.”
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