Utah Audit Reports

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Issue Date: April 28, 2009
Audit Report No.: 2009-DE-1003
File Size: 93.14KB

Title: SecurityNational Mortgage Company, Murray, Utah, Did Not Follow HUD Requirements in Underwriting Insured Loans and Did Not Follow Quality Control Requirements

The U.S. Department of Housing and Urban Development's (HUD) Office of Inspector General audited SecurityNational Mortgage Company (SecurityNational), a Federal Housing Administration (FHA)-approved direct endorsement lender, to determine whether it properly underwrote insured loans and whether its quality control function met requirements.

SecurityNational did not follow HUD regulations when underwriting 18 FHA-insured loans. One of the loans contained significant underwriting deficiencies because the borrower overstated their self-employment income and SecurityNational did not detect the borrower's misrepresentation. In addition, SecurityNational did not review all FHA-insured loans that defaulted within the first six months, nor did it perform its monthly quality control reviews in a timely manner.

We recommend that HUD require SecurityNational to reimburse it for the loss on the loan with a significant deficiency. We also recommend that HUD monitor SecurityNational to ensure that it effectively monitors its underwriters' actions and properly performs its quality control reviews.

Issue Date: August 10, 2007
Audit Report No.: 2007-DE-1006
File Size: 182.50KB

Title: The State of Utah Did Not Comply with HOME Investment Partnerships Program Requirements

HUD-OIG audited the State of Utah's (State) HOME Investment Partnerships Program (HOME). We selected the State's HOME program for audit because it received more than $12 million in entitlement funds from 2004 to 2006 and the Office of Inspector General had not performed an audit of the State's HOME program. Our objectives were to determine whether the Utah Department of Community and Culture, Division of Housing and Community Development (Division), properly used and recorded HOME program income in compliance with U. S. Department of Housing and Urban Development (HUD) requirements; established and completed HOME projects within the required time periods; properly performed the required monitoring of the HOME projects; and, ensured that HOME funds were used for HOME activities.

The Division incorrectly used more than $1 million in HOME funds when program income funds were available for use. The Division generated so much program income that it did not effectively expend its entitlement funds and could lose more than $4 million in entitlement funds because it did not establish and complete HOME projects within the required periods. The Division also did not conduct the required monitoring of the contract recipients' HOME activities. It used about $300,000 in HOME funds to pay expenses for the Utah Capacity Building Collaborative without substantiating that the expenses were for HOME-related activities.

We recommend that the director of HUD's Denver Office of Community Planning and Development require the Division's management to establish and implement written policies and procedures for the HOME functions and the Olene Walker Housing Loan Fund's board to bring its goal into agreement with its objective and HUD requirements. We recommend that the director determine whether the questionable costs were necessary and require the Division to repay any unnecessary costs. We also recommend that the director monitor the Division's HOME activities and provide technical assistance.

Issue Date: July 28, 2006
Audit Report No.: 2006-DE-1005
File Size: 793KB

Issue Date: September 16, 2005
Audit Report No.: 2005-DE-1005
File Size: 103.3KB

Title: The Housing Authority of the County of Salt Lake, Utah Adequately Controlled Occupancy Functions, but Inappropriately Loaned Funds

HUD-OIG reviewed the Housing Authority of the County of Salt Lake's internal controls over its Housing Choice Voucher Program and Public Housing to determine whether the controls provided reasonable assurance that the Authority's programs complied with HUD requirements.

The Authority's controls provided reasonable assurance that its staff properly assessed tenant eligibility, verified tenant income, calculated Section 8 subsidy payments, calculated Public Housing tenant rents, and used Section 8 housing choice vouchers. In addition, the Authority's controls over housing inspections provided reasonable assurance of timely and well-documented inspections, and enforcement of corrective actions for identified violations. However, the Authority inappropriately loaned $375,000 of HUD funds to the Housing Authority of Salt Lake City.

We recommended that HUD require the Authority to establish a policy concerning proper documentation of any future loans and to use the funds repaid by the Housing Authority of Salt Lake City for HUD-related housing activities.

Issue Date: May 6, 2005
Audit Report No.: 2005-DE-1004
File Size: 328.45KB

Title: Aspen Home Loans, American Fork, UT, Did Not Follow Federal Housing Administration Requirements for Loan Origination and Quality Control

We audited Aspen Home Loans (Aspen) in American Fork, UT. We determined an audit was warranted based on loan origination and quality control deficiencies identified in a prior audit.

Our audit objectives were to determine whether Aspen complied with U.S. Department of Housing and Urban Development (HUD) regulations, procedures, and instructions in the origination of insured loans selected for review and to determine whether Aspen's quality control plan, as implemented, met HUD's requirements.

Aspen did not comply with HUD regulations, procedures, and instructions in the origination of any of the 11 loans selected for review. Loans were originated by independent contractors who were self-employed individuals. In addition, Aspen operates out of unapproved branch offices. We also identified one loan that did not have a proper verification of employment.

Aspen's quality control plan is incomplete and inadequate as implemented. For example, (1) the required number of quality control reviews is not performed; (2) the owner, who also originates insured loans, is the only quality control reviewer; (3) quality control reviews are not performed or reported accurately; (4) the owner did not know about the HUD requirement that all early default loans be reviewed in addition to the normal random sample selection; and (5) the owner is the branch manager for three separate office locations.

Issue Date: May 4, 2005
Audit Report No.: 2005-DE-1003
File Size: 147.62KB

Title: Citywide Home Loans in Salt Lake City, UT, Did Not Comply with Federal Housing Administration Loan Origination and Quality Control Requirements

We audited Citywide Home Loans (Citywide) in Salt Lake City, UT. We determined an audit was warranted based on loan origination and quality control deficiencies identified in a prior audit.

Our audit objectives were to determine whether Citywide complied with U.S. Department of Housing and Urban Development (HUD) regulations, procedures, and instructions in the origination of insured loans selected for review and to determine whether Citywide's quality control plan, as implemented, met HUD's requirements.

Citywide did not comply with HUD regulations, procedures, and instructions in the origination of 20 of the 23 loans selected for review. Citywide used independent loan officers to originate insured loans. HUD prohibits this practice because it represents an increased risk to the insurance fund.

Citywide's quality control reviews were not performed in a timely manner, and corrective actions taken for deficiencies identified were not documented. Citywide used a contractor to implement its quality control plan. However, the contractor completed only 42 percent of the required quality control reviews of the loan files within the 90 days timeframe requirements.

Issue Date: October 13, 2004
Audit Report No.: 2005-DE-1001
File Size: 487.8KB

Title: Ineffective Loan Origination and Quality Control Processes at First Source Financial USA's Midvalve, UT, Branch Office

We audited First Source Financial USA’s (First Source) Midvale, UT, branch office. We determined an audit was warranted based on deficiencies we identified in the areas of loan origination and quality control during a prior audit, Use of Independent Contract Loan Officers to Originate FHA [Federal Housing Admnistration]-Insured Loans, Audit Report 2004-DE-0002, dated April 23, 2004.

Our audit objectives were to determine whether the mortgagee complied with U.S. Department of Housing and Urban Development (HUD) regulations, procedures, and instructions in the origination of insured loans selected for review and to determine whether the mortgagee’s quality control plan, as implemented, meets HUD’s requirements.

First Source’s Midvale branch office did not comply with HUD regulations, procedures, and instructions in the origination of 24 of the 25 loans selected for review. We found employment information that was invalid or questionable and/or passed through the hands of an interested third party, the selling agent for the transaction. In addition, loans were originated by nonemployees or independent contractors.

For 6 of the 24 loans, HUD’s total cost was $787,188. HUD suffered a loss ($227,031) on the sale of four of the properties and paid insurance claims ($183,157) to lenders on two of the properties totaling $410,188. As of June 30, 2004, the remaining 18 loans have a total unpaid insured mortgage balance of $2,205,329, which represents a continuing or imminent insurance risk.

First Source has a quality control plan that complies with HUD requirements. However, the quality control plan was not implemented, and related quality control reviews were not performed at the Midvale, Utah, branch office. The lack of implementation of a quality control plan has contributed to higher default and claim rates and, therefore, unnecessarily high risk to the Federal Housing Administration insurance fund.

Issue Date: September 29, 2004
Audit Report No.: 2004-DE-1004
File Size: 862.3KB

Title: New Freedom, Salt Lake City, UT, Did Not Fully Disclose the Intended Use of Payments Collected from Borrowers of Streamline-refinanced Loan

We audited New Freedom Mortgage Corporation (New Freedom), in Salt Lake City, UT. We selected New Freedom for review because it is a large nationwide mortgagee with the origination and refinancing of Federal Housing Administration insured loans as its main source of revenue.

Our audit objectives were to determine (1) whether New Freedom complied with Real Estate Settlement Procedures Act (the Act) and U. S. Department of Housing and Urban Development (HUD) related requirements when streamline refinancing Federal Housing Administration insured loans and (2) whether New Freedom's Quality Control Plan, as implemented, meets HUD requirements.

Issue Date: March 27, 2003
Audit Report No.: 2003-DE-1004
File Size: 452KB

Title: Pryme Investment and Mortgage Brokers, Inc., Murray, UT

We completed a review of Pryme Investment and Mortgage Brokers, Inc. (Pryme Investment) a FHA approved non-supervised loan correspondent with a main office located in Murray, Utah and branch office located in Pocatello, Idaho. We did not perform an on-site review at Pryme Investment’s branch office. We selected Pryme Investment for review because of their high default and claim rates. The objectives of our review were to: (1) determine whether the mortgagee acted in a prudent manner and complied with HUD regulations, procedures, and instructions in the origination of FHA-insured loans selected for review; and (2) determine whether the mortgagee’s quality control plan, as implemented, meets HUD requirements.

We found that Pryme Investment has not adequately implemented its quality control process and is deficient in its overall quality control activities. Furthermore, Pryme Investment did not administer or carry out its non-supervised loan correspondent activities in conformity with HUD-FHA approval requirements. In addition, Pryme Investment did not always originate FHA-insured loans in accordance with HUD requirements and prudent lending practices.

We recommended that Pryme Investment's participation in HUD's Single Family Mortgage Insurance Programs be discontinued, and that HUD take any administrative action(s) as deemed appropriate. We also made recommendations to prevent the reoccurrence of deficiencies should HUD determine removal of Pryme Investment's approval as a non-supervised loan correspondent is not warranted.

Issue Date: September 25, 2002
Audit Memorandum Number: 2002-DE-1005
File Size 478KB

Title: Congressionally Requested Audit of the Outreach and Training Grant Awarded to the Crossroads Urban Center, Salt Lake City, Utah Grant Numbers FFOT98028UT and FFOT00039UT

We completed an audit of the Crossroads Urban Center's two Outreach and Training Grants (OTAG) and a Public Entity Grant. Crossroads Urban Center is a nonprofit organized in the State of Utah. The audit identified that the Crossroads Urban Center did not adequately document costs of the grant and did not have a Federally approved cost allocation plan when it charged at least $23,600 of indirect costs to a HUD grant. Also, the Crossroads Urban Center used at least $14,400 in grant funds for ineligible costs that consisted of a 20% indirect cost allocation for donated rent.

Overall the Crossroads Urban Center used its grant funds for eligible activities. The nonprofit documented its lobbying activities and as a matter of policy did not charge these costs to the HUD grants. However, the Crossroads Urban Center did not adequately document costs of the grant and did not have a Federally approved cost allocation plan when it charged at least $23,600 of indirect costs to a HUD grant. Also, the Crossroads Urban Center used at least $14,400 in grant funds for ineligible costs that consisted of a 20% indirect cost allocation for donated rent. Our report contains four recommendations to address the issues identified in the report.

Issue Date: March 12, 2002
Audit Memorandum Number 2002-DE-1801

Title: American Union Mortgage, Inc., Sandy, Utah

Our review of American Union's management controls over its loan origination and quality control procedures for the origination of FHA-insured loans showed American Union not to be in compliance with HUD requirements in two areas: (1) American Union used independent contract loan officers to originate FHA-insured loans, in American Union's name; and, (2) American Union did not have sufficient management controls necessary to effectively oversee its loan origination procedures.

Issue Date: October 7, 1996
Audit Case Number 97-DE-214-1001

Title: Rawson Management Company Multifamily Management Agent, Hooper, Utah

We found that the agent was not complying with the terms and conditions of the Regulatory Agreements or HUD regulations and instructions relating to the operation of HUD-insured projects. The agent: (1) has charged the projects for ineligible salaries; (2) has improperly distributed project funds to the project owner; and (3) has not established adequate controls over project funds. In addition, the agent has not thoroughly investigated conversion to energy saving individual utility meters.