1.) Thus, centralized servicing could reduce staff costs. RHCDS believes the system will substantially lower servicing costs, saving over $100 million per year by fiscal 2000 and each year thereafter. RHCDS officials agree that changing the law to allow direct loan borrowers to refinance their direct loans using RHCDS guaranteed loans, providing incentives, and eliminating policies that prohibit considering loans with balances of less than $5,000 and small subsidy payments for graduation should incrementally improve graduation rates. However, these changes would also likely reduce the number of borrowers of direct RHCDS loans who graduate to private credit. Opportunities for Cost Savings and Management Improvements in the Multifamily Area

RHCDS and others have proposed program changes aimed at reducing the cost of the multifamily program. We and others have also found that the process for funding individual projects for multifamily rental housing does not ensure that the neediest areas receive assistance from the program. Net savings could be achieved by shortening the term of the loan from 50 to 40 years. Eliminate certain equity loans. Each year, RHCDS allocates a portion of its loan program appropriation to fund some of these equity loans. 3.) Opportunities to Reduce Fraud, Waste, and Abuse in the Multifamily Program

The U.S. Department of Agriculture’s (USDA) Inspector General (IG) has found instances of fraud, waste, and abuse by a number of participants in the Rural Housing and Community Development Service’s multifamily housing loan program.
Why GAO Did This Study

Pursuant to a congressional request, GAO provided information on the Rural Housing and Community Development Service's (RHCDS) housing loan programs, focusing on opportunities for cost savings and management improvements in the loan programs.

What GAO Found

GAO found that: (1) RHCDS is improving its loan programs' operations, but improving program delivery could save the federal government money and benefit borrowers and tenants in the programs; (2) centralized servicing of RHCDS loans could save over $100 million per year through staff reductions and greater staff productivity; (3) the number of direct loan program borrowers graduating to private credit could be increased by allowing borrowers to refinance their loans with commercial lenders and considering all loans for graduation, but RHCDS has few mechanisms in place to force loan graduation; (4) RHCDS could reduce multifamily housing program costs by shortening the terms of loans, eliminating certain equity loans made to owners, and funding more projects not requiring rental assistance; and (5) the process used to fund individual projects does not ensure that the neediest areas receive program assistance.