	Background

The Title I property improvement program was established by the National Housing Act (12 U.S.C. Information Needed to Manage the Program Is Not Collected by HUD

HUD is not collecting the information needed to manage the Title I program. Specifically, we found that HUD (1) collects little information when loans are made on the borrowers, properties, and loan terms; (2) does not always have accurate data on the types of loans for which claims are submitted; and (3) does not maintain information on why it denies loan claims or why it subsequently approves some of them for payment. Additional information that HUD collects on other single-family home loan insurance programs, such as the borrowers’ addresses, Social Security numbers, income, and debt, is not collected by HUD when Title I loans are made. However, the on-site monitoring reviews HUD conducted of lenders’ compliance with the program’s regulations have declined significantly over the last 3 years. HUD can deny a lender’s claim if the lender has not followed HUD’s underwriting standards in making the loan. Each of these options would increase the amount of risk lenders are exposed to and provide greater incentives for them to do a better job in the underwriting and servicing of Title I loans. HUD Is Changing the Title I Program

Under HUD’s 2020 Management Reform Plan and related efforts, the agency has been making changes to the Title I program’s operations. Conclusions

Weaknesses exist in HUD’s management of its Title I property improvement loan insurance program and in its oversight of the program’s lenders. Improve the Title I claims examination process by ensuring that (1) the documents included in the claim files clearly explain why a claim that was originally denied was subsequently paid and which program official authorized payment; (2) all documents required by the program’s guidelines and regulations, including the original loan application, inspection report, and completion certificate, are contained in the claim application package before a claim is paid; (3) the number of claims subject to an underwriting review is increased by extending the length of time after origination during which loan defaults are subjected to review, with notification of this change sent to lenders in writing; and (4) procedures are developed to routinely provide the Quality Assurance Division with the information collected during the claims examination process that is needed to monitor and target lenders for review. To determine whether options and information presented by Price Waterhouse in its HUD-commissioned study of the Title I program could provide lenders with greater incentives to improve loan underwriting and servicing, we reviewed Price Waterhouse’s report of August 1997 and the program’s regulations that influence loan risk. Our information on the efforts HUD plans or has under way to strengthen the program’s management and oversight was obtained through interviews with HUD officials in charge of the Title I program, reviewing HUD’s 2020 Management Reform Plan, and reviewing Price Waterhouse’s August 1997 report on the program. A recorded menu will provide information on how to obtain these lists.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the Department of Housing and Urban Development's (HUD) administration of the National Housing Act Title I program, focusing on: (1) the extent to which the information needed to manage the program was available to HUD; (2) the extent to which HUD was overseeing the program's lenders; (3) whether options and information presented by Price Waterhouse in its HUD-commissioned study of the Title I program could provide lenders with greater incentives to improve loan underwriting and servicing; and (4) whether HUD has any efforts planned or under way to strengthen its management and oversight.

What GAO Found

GAO noted that: (1) HUD is not collecting the information needed for managing the Title I property improvement loan program; (2) specifically, GAO found that when loans are made, HUD collects little information on the borrowers, the properties, or the loan terms, such as the borrowers' income and the addresses of the properties being improved; (3) moreover, HUD does not maintain information on why it denies loan claims or why it subsequently approves some of those claims for payment; (4) HUD provides limited oversight of lenders' compliance with the program's regulations; (5) it conducted four on-site quality assurance reviews of lenders in fiscal year 1997 of the approximately 3,700 lenders participating in the program; (6) regarding the need for oversight of lenders' compliance, GAO found that loan claim files submitted by lenders to HUD following loan defaults often do not contain required loan documents; (7) in addition, some claims are paid by HUD even though there are indications that the lenders did not comply with the required underwriting standards when insuring the loans; (8) in August 1997, Price Waterhouse in its HUD-commissioned review of the Title I program reported, among other things, on options and provided information on how to restructure the program; (9) these options could provide greater incentives for lenders to improve the making and servicing of the program's loans; (10) under HUD's 2020 Management Reform Plan and related efforts, the agency is making significant changes in all of its single-family housing programs, including the Title I program; (11) these changes are motivated in part by HUD's goals to downsize the agency and to address long-standing agencywide management weaknesses; (12) the changes being made that affect the Title I home improvement insurance program include: (a) streamlining and automating the program's claims examination process; and (b) consolidating the agency's efforts to monitor lenders into four locations; and (13) however, it is uncertain whether these changes will affect the weaknesses GAO identified in the oversight of the Title I program.