Homeownership: Information on Single-Family Loans Sold by HUD (Letter
Report, 06/15/99, GAO/RCED-99-145).

Pursuant to a congressional request, GAO provided information on the
single family loans sold by the Department of Housing and Urban
Development (HUD), focusing on the: (1) status of single-family loans
sold; (2) ways in which HUD has ensured that the purchasers of these
loans abide by the forbearance requirements contained in the loan sales
agreements; and (3) changes HUD has made in the staffing resources used
to service the loans it holds.

GAO noted that: (1) as of the end of 1998, most homeowners whose loans
were sold and for which GAO had data on the disposition of the loan,
continued to own their homes; (2) according to the company responsible
for servicing these loans, for 55 percent of the 58,012 loans that it
serviced, homeowners were current under the original, or forbearance,
agreement terms of the loans; (3) an additional 14 percent of the loans
had been paid off or refinanced; (4) the remaining 31 percent of these
loans were delinquent, pending foreclosure, foreclosed, in bankruptcy,
or resolved in some other way; (5) to ensure that the servicers of
single-family loans honor the borrower protections contained in the loan
sales agreements--including reduced mortgage payments--HUD conducted
compliance reviews of loan servicers and operated a toll-free telephone
complaint and information line for borrowers whose loans had been sold;
(6) through these methods, HUD found, among other things, that loan
servicers sometimes did not appropriately consider borrowers' ability to
pay higher payments and that some borrowers thought loan servicers
required too high a mortgage payment; (7) according to HUD, servicers
have taken action to address the findings and concerns raised by HUD's
compliance reviews and its telephone complaint line; (8) however, in
some cases, HUD's records either do not show whether servicers took
corrective action or do not describe the corrective action taken; (9)
while data on the staffing devoted specifically to servicing HUD-held
loans were not available, total staffing and staffing devoted to
managing both HUD-held loans and HUD-owned properties has declined
dramatically, particularly in the last 2 years; (10) specifically, staff
located in field offices who were responsible for managing single-family
loans and properties declined by an estimated 56 percent--or 683
full-time equivalent staff--during fiscal years 1997 and 1998--over
twice the rate of the total staffing decline during this period; (11)
this decline in staffing levels occurred despite an increasing workload
resulting from property disposition; (12) furthermore, much of the
decline in staffing occurred after HUD had dramatically reduced its
inventory of HUD-held loans; and (13) according to HUD officials, the
reduction in the inventory of HUD-held loans allowed the Office of
Housing to decrease its staffing levels.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-99-145
     TITLE:  Homeownership: Information on Single-Family Loans Sold by
	     HUD
      DATE:  06/15/99
   SUBJECT:  Mortgage programs
	     Mortgage loans
	     Foreclosures
	     Reductions in force
	     Human resources utilization
	     Loan defaults
	     Loan repayments
	     Internal controls
	     Financial management
IDENTIFIER:  HUD Single Family Mortgage Assignment Program

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rc99145 GAO United States General Accounting Office

Report to the Subcommittee on Housing and Transportation,
Committee on Banking, Housing and Urban Affairs, U. S. Senate

June 1999 HOMEOWNERSHIP Information on SingleFamily Loans Sold by
HUD

GAO/RCED-99-145

  GAO/RCED-99-145

Page 1 GAO/RCED-99-145 HUD's Single- Family Loans United States
General Accounting Office

Washington, D. C. 20548 Resources, Community, and Economic
Development Division

B-282006 Letter June 15, 1999 The Honorable Wayne Allard Chairman
The Honorable John F. Kerry Ranking Minority Member Subcommittee
on Housing and Transportation Committee on Banking, Housing, and
Urban Affairs United States Senate

In 1994, in an effort to make better use of its resources, the
Department of Housing and Urban Development (HUD) undertook a
program designed to liquidate its inventory of single- family
loans. From June 1994 through September 1997, HUD sold 98,640
single- family loans in a series of six sales. Nearly all of these
loans were acquired by HUD through its now defunct Mortgage
Assignment Program, which, since 1976, had provided borrowers who
had defaulted on their mortgages with reduced or suspended
mortgage payments for a limited time. 1 The purchasers of these
loans agreed to offer borrowers the same forbearance, or lower
loan payments, that HUD was required to offer before the loans
were sold. According to HUD, these sales allowed the Department to
achieve critically needed staff reductions and resulted in over
$830 million in estimated

budgetary savings. Concerned about the treatment of homeowners
whose loans were sold, you asked us to describe (1) the current
status of single- family loans sold and (2) the ways in which HUD
has ensured that the purchasers of these loans abide by the
forbearance requirements contained in the loan sales agreements.
In addition, you asked us to provide information on the changes
HUD has made in the staffing resources used to service the loans
it holds. 2

1 In January 1996, the Congress passed legislation terminating the
Single- Family Mortgage Assignment Program. As a result, HUD has
not accepted any new applications for assignment since April 26,
1996. However, because of the large volume of last- minute
filings, some applications for assignment were still being
processed throughout 1997.

2 Servicing a loan consists of, among other things, collecting
mortgage payments, establishing and maintaining escrow accounts
for the payment of real estate taxes, providing borrowers with
annual financial reports, providing forbearance to borrowers, and
initiating foreclosure procedures.

B-282006 Page 2 GAO/RCED-99-145 HUD's Single- Family Loans

Only one of the loan servicers we contacted was willing to provide
data on the current status of single- family loans sold. However,
this company serviced 58,012 of the 98,640 single- family loans
sold-- 29,348 loans it purchased directly from HUD, and 28, 664
loans owned by other purchasers of HUD single- family loans. 3

Results in Brief As of the end of 1998, most homeowners whose
loans were sold and for which we had data on the current
disposition of the loan, continued to own their homes. According
to the company responsible for servicing these loans, for 55
percent of the 58, 012 loans that it serviced, homeowners were
current under the original, or forbearance, agreement terms of the
loans. An additional 14 percent of the loans had been paid off or
refinanced. The

remaining 31 percent of these loans were delinquent, pending
foreclosure, foreclosed, in bankruptcy, or resolved in some other
way. To ensure that the servicers of single- family loans honor
the borrower protections contained in the loan sales agreements--
including reduced mortgage payments-- HUD conducted compliance
reviews of loan servicers and operated a toll- free telephone
complaint and information line for borrowers whose loans had been
sold. Through these methods, HUD found, among other things, that
loan servicers sometimes did not appropriately consider borrowers'
ability to pay higher payments and that some borrowers thought
loan servicers required too high a mortgage

payment. According to HUD, servicers have taken action to address
the findings and concerns raised by HUD's compliance reviews and
its telephone complaint line. However, in some cases, HUD's
records either do not show whether servicers took corrective
action or do not describe the corrective action taken.

While data on the staffing devoted specifically to servicing HUD-
held loans were not available, total staffing and staffing devoted
to managing both HUD- held loans and HUD- owned properties has
declined dramatically, particularly in the last 2 years. 4
Specifically, staff located in field offices who were responsible
for managing single- family loans and properties

3 The purchasers of loans either serviced the loans themselves or
hired other companies to do so. In either case, the company that
services the loan must be a HUD- approved loan servicer.

4 HUD acquires single- family properties when it forecloses on the
loans it holds or when lenders foreclose on HUD- insured loans.
During fiscal year 1998, HUD had, on average, about 40, 000
singlefamily properties in its inventory.

B-282006 Page 3 GAO/RCED-99-145 HUD's Single- Family Loans

declined by an estimated 56 percent-- or 683 full- time equivalent
staff-  during fiscal years 1997 and 1998-- over twice the rate of
the total staffing decline during this period. 5 This decline in
staffing levels occurred despite

an increasing workload resulting from property disposition.
Furthermore, much of the decline in staffing occurred after HUD
had dramatically reduced its inventory of HUD- held loans.
According to HUD officials, the

reduction in the inventory of HUD- held loans allowed the Office
of Housing to decrease its staffing levels.

Background In the early 1990s, HUD was being overwhelmed by a
growing number of single- family loans entering its inventory of
owned assets, mainly through its single- family Mortgage
Assignment Program. As a result, there was increased demand on
HUD's resources to service these loans. In 1994, in an effort to
make better use of its resources, HUD decided to sell its
inventory of single- family loans. In June 1994, when HUD held its
first loan sale, it owned over 100, 000 single- family loans.
Through a series of six sales, from June 1994 through September
1997, HUD sold 98,640 single- family loans. HUD's single- family
loans were sold without mortgage insurance-- that is,

HUD did not insure the purchasers of the loans against losses that
would be caused by borrowers' defaults. At the end of fiscal year
1998, HUD owned about 12, 000 single- family loans.

The majority of the loans sold by HUD were acquired through its
now defunct Mortgage Assignment Program. This program allowed
lenders, under certain conditions, to assign defaulted Federal
Housing Administration (FHA)- insured mortgages to HUD, making HUD
the owner of the loan. For borrowers accepted into the program,
HUD paid the mortgage debt, took assignment of the loan from the
lender, and developed a new repayment plan (forbearance agreement)
for the borrower. Under this agreement, mortgage payments could be
reduced or suspended for up to 36 months. HUD, acting as lender,
collected monthly mortgage payments from the borrowers while
allowing them to keep their home.

By taking assignment of loans rather than having lenders foreclose
on them, HUD can, at times, avoid foreclosure losses, help
borrowers retain their homes, and provide these borrowers with an
opportunity to avoid

foreclosure. However, we reported in October 1995, that even with
the 5 A full- time equivalent is a measure of employment. It is
determined by dividing the total number of an agency's work hours
within a fiscal year by 2,087, which is the number of hours in a
federal workyear.

B-282006 Page 4 GAO/RCED-99-145 HUD's Single- Family Loans

forbearance provided by HUD to these financially strapped
borrowers, over half would eventually lose their homes through
foreclosure. 6 Moreover, the Mortgage Assignment Program did not
reduce HUD's

foreclosure losses; rather, the program's losses exceeded those
that would have occurred if the loans had gone immediately to
foreclosure without assignment.

All single- family loans sold by HUD came with a loan sales
agreement requiring the loan purchasers and servicers to honor
existing forbearance agreements. The requirements contained in the
loan sales agreements varied, depending upon whether the sold loan
was within or outside the initial 36- month period after
assignment to HUD. If less than 36 months had passed since the
loan was assigned to HUD, the forbearance agreement

could reduce or suspend monthly mortgage payments, depending on
the financial condition of the borrower. For a loan in which 36
months had passed since it was assigned to HUD, the sales
agreement requires that the forbearance agreement stipulate a
minimum monthly payment at least equal to the payment required
under the terms of the original loan (including principal,
interest, taxes, and insurance). After 36 months, the mortgage
payments could be more than the original amount-- in order to pay
off past amounts due and bring the mortgage current sooner-- if
the borrower's financial information indicated that the borrower
could afford to make higher payments. There is no regulatory limit
on the size of this monthly payment. In addition, the servicer
could extend the maturity date of the loan for up to 10 years if
the maximum payment that the borrower

could afford did not completely retire the borrower's liability
within the original terms of the loan. The Majority of Borrowers
Whose Loans Have Been Sold Are Current With Their Loan Payment or
Have Paid Off Their Loans

Data on the disposition of loans were available for 58,012 of the
98,640 single- family loans sold by HUD. These data show that, as
of December 31, 1998, most of the homeowners whose loans were sold
continued to own their homes. According to the company responsible
for servicing these loans, it has worked with many borrowers to
restructure their mortgage debt so that most were able to restore
their credit; reduce their past- due interest; and, ultimately,
bring the loan current. As shown in figure 1, 55 percent of this
servicer's loans are current under the original loan terms or
forbearance agreement terms; 14 percent have been paid off or
refinanced;

6 See Homeownership: Mixed Results and High Costs Raise Concerns
About HUD's Mortgage Assignment Program (GAO/RCED-96-2, Oct. 18,
1995).

B-282006 Page 5 GAO/RCED-99-145 HUD's Single- Family Loans

and 14 percent are delinquent, pending foreclosure, or in
bankruptcy. Four percent have been foreclosed, and the remaining
13 percent have had their servicing transferred or have been
resolved in some other way.

Figure 1: Status of 58, 012 Sold Loans, as of December 31, 1998

\

Source: GAO's analysis of HUD's data.

HUD Has Controls in Place to Monitor Servicers' Compliance With
Homeowner Protections

HUD's compliance reviews and a toll- free telephone service are
the primary controls HUD uses to ensure that servicers comply with
the borrower protections provided under each loan sales agreement.
HUD has employed

these two controls to uncover numerous cases in which servicers
were not complying with borrower protections, and it has directed
servicers to take corrective actions. According to HUD, servicers
have taken actions to correct the problems with protecting
borrowers that were found through compliance reviews and the toll-
free telephone service. However, in some cases, HUD's records
either do not show whether servicers took corrective action or do
not describe the action taken.

HUD Conducted Reviews of Loan Servicers

Compliance reviews of the servicers of sold loans are undertaken
by HUD's quality assurance reviewers at the direction of HUD
headquarters. These directives result from complaints to the
Department's toll- free telephone line and from information
provided to headquarters by field office staff. The loan sales
agreements serve as audit guidelines. These agreements

2,072 (4%) 8,152 (14%) 8,407 (14%)

7,691 (13%) 31,690 (55%) Current Transferred or

resolved Foreclosed

Paid off or refinanced

Delinquent, pending foreclosure, or bankruptcy

B-282006 Page 6 GAO/RCED-99-145 HUD's Single- Family Loans

require loan servicers to offer borrowers forbearance as required
under the now defunct Mortgage Assignment Program, including the
following actions: (1) within the initial 36- month period since
assignment, reducing or suspending mortgage payments on the basis
of the borrower's ability to pay; (2) after the initial 36 months,
setting mortgage payments equal to the original mortgage payment,
or more, if the borrower can afford to make

higher payments; (3) allowing borrowers in default under a
forbearance agreement to pay delinquent principal and interest
(reinstate the forbearance agreement) and avoid foreclosure; and
(4) allowing borrowers who are current under an expiring
forbearance agreement to renew the

agreement for an additional period of time. We reviewed six
compliance reviews of companies that serviced sold loans. These
reviews involved four companies that, together, serviced about 60
percent of the single- family loans sold by HUD since 1994. 7 In
letters

summarizing the results of these reviews, HUD reported numerous
instances in which servicers were not complying with borrower
protections. Specifically, HUD found, among other things, that two
servicers were not allowing borrowers to reinstate the loan once
they were in default and not allowing borrowers who were current
with an expiring forbearance plan to renew it for an additional
period of time. In addition, HUD found that all four servicers
were increasing monthly mortgage payments without any financial
support showing that the borrower could afford the higher payment-
- for two servicers, HUD cited this finding in both the initial
and subsequent reviews. Other problems identified through the
compliance reviews included pressuring the borrower to refinance,
harassing the borrower, and failing to employ prudent servicing
practices.

Overall, in response to most findings, servicers agreed to change
how they service sold loans and/ or took corrective actions on
individual loans. For example, after HUD informed one servicer
that borrowers were not being given the opportunity to reinstate
their loan, the servicer responded that its collection personnel
would be made aware of the requirement and that the requirement
would be made part of the servicer's collection procedures. In
another review, HUD found that the servicer increased the mortgage

payment without any analysis of the borrower's financial
condition. In 7 HUD conducted a total of seven compliance reviews
of servicers of sold single- family loans, six of which were
summarized in letters to the loan servicers. HUD did not prepare a
written summary of the remaining compliance review.

B-282006 Page 7 GAO/RCED-99-145 HUD's Single- Family Loans

response, the servicer agreed to begin documenting the financial
analysis upon which mortgage increases are based.

In several instances servicers agreed to take corrective actions
on individual loans in response to HUD's findings. For example,
for one servicer, in six of the loans HUD reviewed, borrowers were
not given the opportunity to renew expired forbearance agreements.
For five of the six loans, the servicer agreed with the facts as
presented by HUD and allowed

the borrowers to renew their forbearance agreements. For the
remaining loan, the servicer responded that the borrower had
brought the loan current. Thus, there was no need to renew the
expired forbearance agreement. This servicer also agreed to make
changes in how it services sold loans-- allowing borrowers to
renew their forbearance agreements-- and to communicate this
requirement to its staff.

Servicers sometimes disagreed with the facts as presented by HUD
and took no action or were unresponsive. For example, in one of
its reviews, HUD found that for 10 borrowers, the servicer was
requiring mortgage payments in excess of what the borrower could
afford to pay. However, the

servicer disagreed with HUD on the facts for 7 of the 10
borrowers, responding that the borrowers were already on suspended
or substantially reduced mortgage payments. HUD is now gathering
additional information to substantiate its earlier findings with
regard to these borrowers and other issues and will present this
information to HUD's Mortgagee Review Board to consider sanctions.
For the remaining three borrowers, the servicer agreed with the
facts as presented by HUD and responded that the problem was due
to a computer system error.

HUD Provided a Telephone Complaints Service

In September 1996, when HUD held its third loan sale, it
established a tollfree telephone complaint line and hired a
contractor to answer the calls. To ensure that borrowers were
aware of the telephone complaint line, HUD

announced its existence to homeowners in its "goodbye letter. 8
HUD's contractor documents each call it receives and then
transfers the information to HUD's field office in Tulsa,
Oklahoma. HUD's Tulsa staff are responsible for contacting the
borrower and, if necessary, the servicer, in an attempt to resolve
the complaint.

8 A goodbye letter informs homeowners that their loan will be
included in an upcoming loan sale.

B-282006 Page 8 GAO/RCED-99-145 HUD's Single- Family Loans

We estimate that since it began operation, HUD's complaint line
has received slightly under 6,900 telephone complaints or
inquiries from borrowers whose loans had been sold. 9 This
telephone service allows borrowers to inquire about the status of
their account or complain about

their servicer. Overall, HUD headquarters officials told us that
about 90 percent of the calls received over its caller complaint
line dealt with routine requests for information, such as an
account status, the reason their particular loan was sold, or the
reasons that the new servicer used business practices that are
different from HUD's. On the basis of our review of a

random sample of 362 caller case files, we estimate 10 that 1,083
of about 6,900 calls received involved serious complaints that
loan servicers were requiring too high a mortgage payment,
demanding that the loan be brought current, and/ or threatening
foreclosure. 11 We categorized the remaining calls as routine
borrower requests for information.

One objective of a HUD- contracted study of the loan sales program
was to examine the type of inquiries and complaints that HUD had
received on its toll- free complaint line. According to this
study, of the calls HUD received through July 1998, about one-
third concerned increases in required monthly mortgage payments;
about 40 percent were inquires about the current or delinquent
status of a loan and the caller's rights with the new private-
sector servicer; and about 27 percent concerned specific amounts
owed or the servicer's receipt of a payment. However, according to
HUD staff responsible for responding to calls, these

complaints often proved to be unwarranted. That is, the staff
said, borrowers often claimed some sort of grievance that did not
prove to be true when the staff researched the matter. For
example, the telephone service received numerous complaints on the
amount required to pay off mortgages because borrowers thought
that their monthly mortgage payments were always applied by
servicers to pay off their original mortgage debt. Often, however,
these monthly payments were only

sufficient to pay interest. In other cases, borrowers did not
provide updated financial information that the servicers needed to
substantiate the

9 A HUD official estimates that there were about 4,800 calls
logged and that an estimated 500 calls were received before the
call log was created. 10 The margin of error for this estimate, at
the 95- percent confidence level, is +/- 264 complaints. 11 One
loan servicer is currently the subject of a class action lawsuit
filed on behalf of about 2,000 borrowers to whom the servicer sent
notices of intention to foreclose.

B-282006 Page 9 GAO/RCED-99-145 HUD's Single- Family Loans

continuing need for forbearance. As a result, the servicers
increased the amount of payments or demanded full payment.
Borrowers offered the following reasons for not providing this
information: (1) the tone in the letters that the new servicer
used was harsh or (2) they never read, or could not understand,
the letter. Finally, some borrowers asked the servicer for a
compromise sale (a forced buy- down); that is, they wanted HUD to

repurchase their loan from the new owner and sell the loan to them
at the compromise sale price. While this practice occurred in the
past, it is not allowed in the loan sales process. According to a
HUD official and information contained in HUD's caller log, almost
all calls received by HUD have been resolved. However, for the
caller files we examined, we found insufficient information for us
to determine the final disposition of 40 percent of these serious
complaints. 12

Loan Sales Occurred During a Period of Staffing Reductions

HUD has dramatically reduced its inventory of HUD- held single-
family loans since the loan sale program began. At the same time,
total HUD housing staffing has been reduced. Given the dramatic
decline in HUD's inventory of HUD- held loans and the elimination
of the Mortgage Assignment Program, it is reasonable to expect
that HUD could reduce the staffing devoted to servicing HUD- held
loans. While we were unable to

obtain data on the staffing resources used to service HUD- held
loans, the total full- time- equivalent staff for asset
management-- which includes the servicing of HUD- held loans-- has
declined from about 3, 400 in fiscal year 1994 to an estimated
2,000 in fiscal 1998. Over two- thirds of this decline was for
full- time equivalent staff in field offices who were managing
singlefamily

assets, and much of the decline occurred during 1997 and 1998.
Finally, asset management is continuing to undergo change.

A major reason for undertaking the loan sales program was to
better use limited staff resources by reducing the number of HUD-
held loans, thereby freeing staff to focus on managing HUD's
portfolio of insured loans. In addition, according to HUD
officials, private- sector companies are much better able to
service loans than are HUD staff. In fact, HUD's housing staff

have many responsibilities other than servicing HUD- held loans
and managing the insured portfolio. Among these responsibilities
are monitoring lenders and quality assurance, managing and
disposing of 12 The margin of error for this estimate at the 95-
percent confidence level is +/- 14 percent.

B-282006 Page 10 GAO/RCED-99-145 HUD's Single- Family Loans

property, and overseeing Section 8 housing assistance activities.
Since fiscal year 1991, HUD's total housing staff has declined by
over 40 percent. Much of this decline has occurred since fiscal
year 1994-- the first year in which HUD auctioned single- family
loans and a period in which FHA

greatly modified its loan- processing functions. Specifically,
HUD's total housing staff, as measured by full- time- equivalent
staff, declined from about 6, 900 for fiscal year 1991 to about
6,000 for fiscal 1994 and to an estimated 4,000 for fiscal 1998.
(See fig. 2.)

Figure 2: Total Full- Time Equivalent Housing Staff, Fiscal Years
1990- 98

Note: The data for fiscal year 1998 are based on a projection made
as of August 31, 1998. Source: HUD.

According to HUD, fiscal year 1998 was a year of transition, as
staff and organizations were realigned to implement HUD's 2020
Management Reform. Servicing HUD- held single- family loans was
performed at seven

field offices in fiscal 1998. HUD plans to consolidate servicing
functions in 0 2,000

4,000 6,000

8,000 1990

1991 1992

1993 1994

1995 1996

1997 1998

Full- time- equivalent staff

Fiscal year

B-282006 Page 11 GAO/RCED-99-145 HUD's Single- Family Loans

one location in fiscal 1999. According to the most recent
financial statement audit of FHA, however, because of staffing
changes, workload transitions, and the anticipation of selling the
remaining notes, FHA was less aggressive in undertaking
foreclosure actions or other servicing alternatives, such as
workout plans or increased collection efforts. 13 As a result,
more of the HUD- held single- family loan portfolio became
delinquent during fiscal year 1998. Specifically, the portion of
HUD- held single- family loans that were delinquent increased from
57 percent in fiscal year 1997 to 70 percent in fiscal 1998. In
early 1999, HUD contracted for

functions involving the servicing of HUD- held loans and the
management and disposition of HUD- owned properties. Agency
Comments We provided copies of a draft of this report to HUD for
review and

comment. HUD agreed with the report's findings and noted that it
has instructed the staff responsible for resolving telephone
complaints to maintain better records of how complaints are
resolved and that it is continuing to pursue instances in which it
finds inappropriate loan servicing. Overall, HUD affirmed the
Department's intent to continue its efforts to ensure fair and
equitable treatment of borrowers whose loans

were sold. HUD's comments appear in appendix I. Scope and
Methodology

In preparing this report, we focused on five of HUD's six single-
family loan sales. 14 The loans sold through these five sales
represented about 85 percent of all the loans HUD sold from June
1994 through September 1997. Nearly all of these loans were
formerly in HUD's Mortgage Assignment Program. First, to determine
the current disposition of single- family loans that have

been sold, we collected information from the largest servicer of
sold singlefamily loans on the status of its loans as of December
31, 1998. This was the only loan servicer that would agree to
provide such data.

13 See Federal Housing Administration, Audit of Fiscal Year 1998
Federal Basis Financial Statements, Department of Housing and
Urban Development, Office of Inspector General (Report: 99- FO-
131- 0002, March 12, 1999).

14 The first HUD sale consisted of 15,212 HUD- held 221( g) (4)
loans. These are performing loans that are assigned to HUD in
their twenty- first year by lenders, as previously allowed under
the terms of FHA mortgage insurance.

B-282006 Page 12 GAO/RCED-99-145 HUD's Single- Family Loans

Second, to identify what actions HUD has taken to ensure that loan
servicers abide by the borrower protections contained in loan
sales agreements, we interviewed HUD officials at headquarters in
Washington, D. C.; Quality Assurance staff in Atlanta, Georgia;
and staff at the HUD field

office in Tulsa, Oklahoma, who are responsible for the toll- free
borrower phone line. We also reviewed HUD's compliance reviews and
the correspondence between HUD and loan servicers that were the
subject of those reviews and examined HUD's telephone complaint
log of calls received on its toll- free complaint line since 1996.
For the estimated 6, 900 of these calls received, we reviewed a
random sample of 362 caller case files in order to determine the
nature of callers' complaints and their current status. We did not
verify whether loan servicers who agreed to make policy changes or
take other corrective actions in response to HUD's findings
actually made changes in the way they service loans.

Finally, to analyze changes in HUD's staffing resources, we
interviewed headquarters officials responsible for overseeing the
management of HUD's acquired assets and relied on staffing and
workload data provided by the Department. We conducted our review
from July 1998 through May 1999 in accordance with generally
accepted government auditing standards.

We are providing copies of this report to Senator Connie Mack, the
Chairman of the Subcommittee on Economic Policy, Senate Committee
on Banking, Housing, and Urban Affairs; the Honorable Andrew M.
Cuomo,

the Secretary of Housing and Urban Development; and other
interested parties. Copies will also be made available to others
upon request.

B-282006 Page 13 GAO/RCED-99-145 HUD's Single- Family Loans

If you or your staff have any questions about this report, please
contact me at (202) 512- 7631. Major contributors to this report
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Judy A. England- Joseph Director, Housing and Community
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Page 14 GAO/RCED-99-145 HUD's Single- Family Loans

Appendix I Comments From the Department of Housing and Urban
Development Appendi x I

Appendix I Comments From the Department of Housing and Urban
Development

Page 15 GAO/RCED-99-145 HUD's Single- Family Loans (385777) Let t
er

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