Washington State Audit Reports

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Date Issued: January 19, 2011
Audit Report No.: 2011-SE-1002
File Size: 158.73

Title: Washington State Housing Finance Commission, Seattle, WA, Did not Always Disburse Its Tax Credit Assistance Program Funds in Accordance With Program Requirements

The U. S. Department of Housing and Urban Development, Office of Inspector General, audited the Washington State Housing Finance Commission (the Commission) to determine whether the Commission established eligible grant projects, reported tax credit assistance program (TCAP) information into Recovery.gov accurately and completely, and paid eligible TCAP expenditures in accordance with American Recovery and Reinvestment Act of 2009 requirements.

The Commission complied with the applicable Recovery Act and HUD rules and regulations in establishing eligible grant projects, and in the reporting of TCAP information in FederalReporting.gov. However, the Commission did not always disburse TCAP funds in accordance with program requirements. The Commission reimbursed two project owners for ineligible permanent loan fees, appraisal fees and unsupported legal costs.

We recommended that HUD require the Commission to reimburse $170,036 to its U.S. Treasury line of credit from non-Federal funds for the ineligible expenditures. We also recommend HUD require the Commission to provide supporting documentation for $17,068 in unsupported costs or reimburse its U.S. Treasury line of credit from non-Federal funds. Further, we recommend that HUD require the Commission to establish and implement written policies and procedures for the review and approval of budgets and draw requests.

Date Issued: August 31, 2010
Audit Report No.: 2010-SE-1001
File Size: 364KB

Title: Washington State Did Not Disburse Its Homelessness Prevention and Rapid Re-Housing Funds in Accordance With Program Requirements

The U.S. Department of Housing and Urban Development, Office of the Inspector General, audited the Washington State Department of Commerce (State).  Our audit objective was to determine whether the State disbursed Homelessness Prevention and Rapid Re-Housing Program (HPRP) grant in accordance with American Recovery and Reinvestment Act of 2009 requirements.  The State paid for HPRP services for ineligible participants and participants whose eligibility was not supported.  In addition, the State made a duplicate payment to one of its subgrantees for HPRP.  We recommended that HUD require the State reimburse its HPRP $3,435 from non-Federal funds for one ineligible participant and either provide supporting documentation for the participants lacking adequate documentation or reimburse its program $166,785 from non-Federal funds for those affected participants.  We also recommended that HUD require the State reimburse its HPRP $7,034 from non-Federal funds for the duplicate payment to its subgrantee.

Date Issued: April 21, 2010
Audit Report No.: 2010-SE-1801
File Size: 57KB

Title: Seattle Housing Authority’s Capacity To Administer Recovery Act Funding Under the Capital Fund Program

The U.S. Department of Housing and Urban Development's (HUD) Office of Inspector General conducted a capacity review of Seattle Housing Authority's (Authority) capital fund to determine whether there was evidence that the Authority lacked the capacity to adequately administer its Recovery Act funding in accordance with requirements. Our review of the Authority was limited to gaining an understanding of internal controls over the administration of Recovery Act funds and was limited to our stated objective and should not be considered a detailed analysis of the Authority's internal controls or operations.

We did not find evidence that the Authority lacked the capacity to adequately administer its Recovery Act funding. Based on our limited review, the Authority

• Had written policies and procedures for standard procurement,

This report contains no recommendations, and no further action is necessary.

Date Issued: September 15, 2009
Audit Report No.: 2009-SE-1802
File Size: 162.61KB

Title: The State of Washington Did Not Always Allocate Its Neighborhood Stabilization Program Funds Based on Greatest Needs

We audited the State of Washington's Neighborhood Stabilization Program. The audit was part of our fiscal year 2009 annual audit plan. We selected the State because it was responsible for the distribution of funds to the entitlement areas, as well as to nonentitlement areas for the state of Washington. Our objective was to determine whether the State's Program implementation was compliant with U.S. Department of Housing and Urban Development (HUD) requirements.

The State's Program implementation was generally compliant with HUD requirements. However, the distribution was not entirely based on greatest need. This condition occurred because the State misinterpreted foreclosure need score data obtained from the Local Initiatives Support Corporation. As a result, some communities received excessive allocations, while others that had a greater need did not receive an allocation.

We recommended that the Seattle Office of Community Planning and Development ensure that the State awards funds to subrecipients that were not funded or were underfunded so that these funds will be used for communities that had a greater need than some of the communities that received funding and that the state fully understands external data before using it to make future allocations of funds.

Date Issued: July 29, 2009
Audit Report No.: 2009-FW-1013
File Size: 1.13MB

Title: Bank of America, Seattle, Washington, Needs to Improve Its Compliance with HUD Requirements

We reviewed Bank of America's (servicer) home equity conversion mortgage (HECM) servicing division located in Seattle, Washington. Bank of America is one of the largest lenders of HECM mortgages for properties located in the five southwest states in the U. S. Department of Housing and Urban Development's (HUD) Region VI jurisdiction. Our objective was to determine whether the servicer complied with HUD regulations, specifically, whether it verified that the properties remained the borrowers' primary residence, ensured maintenance of the properties, and processed HUD claims or property foreclosures in a timely manner.

The servicer did not comply with two HUD requirements in its administration of HECM loans. It did not maintain annual certifications of residency and did not notify HUD in a timely manner of the due and payable status of the mortgages of deceased borrowers. Both weaknesses could result in the properties remaining vacant longer, increased property deterioration, the need for additional maintenance, and potential decline in property value.

We recommended that the Assistant Secretary for Housing-Federal Housing Commissioner require the servicer to implement procedures to ensure that it completes the annual certifications of residency and notifies HUD of the due and payable status of mortgages within 60 days after a borrower's death.

Date Issued: July 20, 2009
Audit Report No.: 2009-SE-1003
File Size: 973.79KB

Title: Eagle Home Mortgage, Kirkland, Washington, Did Not Always Comply with HUD Guidelines When Underwriting Federal Housing Administration-Insured Loans

We audited single-family loan originations at Eagle Home Mortgage (Eagle Mortgage), located in Kirkland, Washington, to determine whether it originated Federal Housing Administration (FHA)-insured loans in accordance with U.S. Department of Housing and Urban Development (HUD) requirements. Eagle Mortgage did not always originate FHA insured loans in accordance with HUD requirements. Specifically, Eagle Mortgage did not follow HUD's underwriting requirements for 15 of the 36 FHA insured loans reviewed, three of which had deficiencies that affected the insurability of the loan. In addition, Eagle Mortgage did not adequately follow its HUD-approved quality control plan when reviewing loans with early payment defaults when it failed to review one loan which defaulted after only four payments. Further, four of seventeen quality control reviews performed by Eagle Mortgage did not find observable deficiencies in the loans. As a result, Eagle Mortgage management did not always have the accurate feedback needed to improve its loan origination process.

We recommend that the Assistant Secretary for Housing - Federal Housing Commissioner (1) require Eagle Mortgage to reimburse or indemnify HUD for actual and potential losses on three loans with underwriting deficiencies, (2) review loans recently underwritten by Eagle Mortgage to verify that the underwriting deficiencies noted during our review are no longer an issue, (3) review Eagle Mortgage's monthly quality control reports to ensure that they include all FHA-insured loans that defaulted within the first six months, and (4) require Eagle Mortgage to conduct training on its quality control plan.

Date Issued: April 15, 2009
Audit Report No.: 2009-SE-1002
File Size: 804.55KB

Title: The John C Cannon Retirement and Assisted Living Residence, Seattle, Washington, Violated Its Regulatory Agreement

At the request of the Region X Multifamily Hub, we audited the John C Cannon Retirement and Assisted Living Residence (project) to determine if the project owner used project funds in accordance with the regulatory agreement. We found that the project owner failed to get HUD approval for leases costing $189,000, used project funds to obtain unneeded equipment costing $10,700, and failed to keep adequate documentation to support expenditures costing $317,000.

We recommend that the Director, Office of Insured Health Care Facilities, require the owner to repay the amount spent for the unapproved leases and unnecessary equipment. We also recommend the Director, Office of Insured Health Care Facilities, require the project owner to provide documentation supporting expenses paid for with project funds. Further, we recommend the Regional Counsel pursue double damages remedies, civil money penalties, and/or administrative sanctions, as appropriate, against the former administrator and the board of directors.

Date Issue: November 18, 2008
Audit Report No.: 2009-SE-1801
File Size: 104.99KB

Title: Actions Under Program Fraud Civil Remedies Act Washington Mutual Bank Seattle, Washington

We audited late endorsement payment histories at Washington Mutual Bank (Washington Mutual), Seattle, Washington. We reported the results of our review in Audit Report 2005-SE-1006, issued on July 5, 2005. After the audit report was issued and the report recommendations were closed out in HUD's Audit Resolution and Corrective Actions Tracking System (ARCATS), we recommended that HUD's Office of General Counsel take additional sanctions against Washington Mutual under the Program Fraud Civil Remedies Act for submission of false loan certifications. As a result of these actions, HUD determined that Washington Mutual was liable under the Program Fraud Civil Remedies Act for 14 loans and entered into a settlement agreement with Washington Mutual on October 2, 2008. The settlement agreement required Washington Mutual to make an administrative payment to HUD of $91,978. We recommend that HUD's Associate General Counsel for Program Enforcement post the $91,978 settlement to HUD's Audit Resolution and Corrective Actions Tracking System.

Date Issued: July 7, 2008
Audit Report No.: 2008-SE-1006
File Size: 160.64KB

Title: The Richland Housing Authority, Richland, Washington, Did Not Adequately Account for Housing Choice Voucher Funds

At HUD's request, we audited the Housing Choice Voucher program of the Richland Housing Authority (Authority). HUD was concerned about the results of an audit of the Authority performed by the Washington State Auditor's Office. Our objective was to determine whether the Authority made ineligible purchases with program funds. We found that the Authority did not track its program expenses. Also, it charged more than $57,000 in unsupported and ineligible costs to the program. We recommend HUD require the Authority to implement controls to ensure that it tracks its program expenses, reconcile its program accounts, and repay its program from nonfederal funds for ineligible expenses. We also recommend HUD require the Authority to provide supporting documentation for unsupported expenses or repay its program from nonfederal funds.

Date Issued: June 3, 2008
Audit Report No.: 2008-SE-1005
File Size: 162.72KB

Title: Renton Housing Authority, Renton, Washington, Overpaid Rental Assistance And Did Not Have Sufficient Controls Over Rent Reasonableness

We audited Renton Housing Authority (Authority), Renton, Washington. The review was initiated due to a hotline complaint from a Housing Choice Voucher program recipient. The complainant stated that the contract rent was unreasonable because it exceeded the rent for comparable unassisted units on the premises. The audit objective was to determine whether the complaint was valid. We also wanted to determine whether the Authority had controls in place to ensure that rents paid to landlords for its Housing Choice Voucher program were reasonable. We found that the hotline complaint was valid. The contract rent for the complainant's assisted unit was higher than for the comparable unassisted units on the premises by an average of more than $100 per month. In addition, the Authority did not have sufficient controls in place to ensure rents were reasonable. We recommend that the Director, Region X Office of Public Housing require the Authority to collect $10,884 from the owner that was overpaid due to unreasonable rent. We also recommend that the Director, Region X Office of Public Housing review the Authority's revised procedures to ensure that rent reasonableness determinations are carried out in accordance with program regulations and requirements.

Date Issued: May 7, 2008
Audit Report No.: 2008-SE-1004
File Size: 451.57KB

Title: A Plus Mortgage, Inc., Tukwila, WA, Overcharged Borrowers and Allowed Independent Contractors and Unapproved Branches to Originate Loans

We audited A Plus Mortgage, Inc. (A Plus), to determine whether (1) the fees charged to Federal Housing Administration (FHA) borrowers by A Plus were appropriate under U.S. Department of Housing and Urban Development (HUD), FHA, and Real Estate Settlement Procedures Act (RESPA) regulations and (2) the loan officers originating FHA-insured loans were employees of A Plus.

A Plus disregarded HUD FHA requirements and provisions of RESPA and engaged in deceptive lending practices. Although it informed borrowers that they could receive a lower interest rate on their loans by paying up-front points and fees, A Plus charged loan discount fees to borrowers without reducing interest rates on the mortgages. This practice allowed A Plus to generate high interest rate loans for which A Plus's sponsor lenders paid A Plus a yield spread premium when the loans closed escrow. As a result, borrowers paid excessive interest and fees for which they received no associated benefit. In addition, all 28 FHA-insured A Plus loans reviewed were originated by independent contractors, unapproved branches, or other non-FHA-approved mortgage broker firms. This occurred because A Plus ignored FHA origination requirements and submitted FHA loans originated by unapproved entities in exchange for a percentage of the loan origination fees, loan discount fees, and yield spread premiums generated by the loans.

We recommend that HUD require A Plus to (1) return unearned and excess yield spread premiums, loan discount fees, and other fees, totaling $153,110, to the borrowers; (2) review and analyze all other FHA-insured loans generated by A Plus with loan discount points when no interest rate reduction occurred, report the results to the Mortgagee Review Board, and issue refunds to the borrowers; (3) discontinue charging loan discount fees when it receives yield spread premiums on a loan; (4) cease changing the names of fees from the initial disclosure to the final HUD-1 settlement statement; (5) instruct its loan officers to ensure that the borrowers clearly understand the nature of all charges associated with their loans; (6) return all loan origination fees, totaling $32,036, to the borrowers on all loans that were originated by third-party independent contractors; (7) only submit loans for FHA insurance that were originated by A Plus employees; and (8) register all of its branch offices with FHA.

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