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Kansas Audit ReportsIssue Date: December 12, 2005 Title: First Magnus Financial Corporation Did Not Follow HUD Regulations When Underwriting 23 Federal Housing Administration LoansHUD-OIG reviewed 45 Federal Housing Administration loans underwritten by the Overland Park, Kansas, branch office of First Magnus Financial Corporation (First Magnus). We concluded that First Magnus did not follow HUD regulations when underwriting 23 of the 45 loans reviewed. The 23 loans contain material deficiencies that affect the insurability of the loans. Material deficiencies include unsupported income and assets, questionable gift funds, underreported liabilities, and questionable employment and credit histories. As a result, these loans place the insurance fund at risk for $2,239,504. We recommended that HUD take appropriate administrative action against First Magnus for not following HUD requirements, including requiring First Magnus to indemnify 21 loans with original mortgage amounts of over $2,018,167 and to indemnify HUD for future losses on two properties not yet sold that HUD paid claims totaling $221,337. Issue Date: May 13, 2005 Title: Corinthian Mortgage Corporation, Mission, KS, Did Not Always Comply with Federal Housing Administration RequirementsWe audited Corinthian Mortgage Corporation (Corinthian Mortgage), a nonsupervised direct endorsement lender located in Mission, KS, because its default rate was significantly higher than the U.S. Department of Housing and Urban Development (HUD) Kansas City field office's average over the past 2 years. Our audit objectives were to determine whether Corinthian Mortgage properly developed and implemented a quality control plan and to determine whether it properly originated Federal Housing Administration loans. Corinthian Mortgage's quality control process did not comply with HUD requirements. Corinthian Mortgage did not ensure that it conducted sufficient and timely quality control reviews. It also did not take prompt corrective action when quality control reports identified material deficiencies. Further, Corinthian Mortgage did not follow HUD requirements when processing and underwriting Federal Housing Administration loans. It improperly originated 3 of the 44 loans reviewed. Additionally, Corinthian Mortgage submitted one loan with a serious misstatement. As a result, HUD insured four loans that placed the insurance fund at risk for $472,833. We recommend that the General Deputy Assistant Secretary for Housing take appropriate administrative action against Corinthian Mortgage including, at a minimum, indemnification for the three actively insured loans and reimbursement for losses already incurred on the remaining loan. Corinthian Mortgage should also reimburse the appropriate parties for unallowable costs charged to borrowers. Issue Date: April 18, 2005 Title: The Kansas City, Kansas, Housing Authority's Controls Over Its Section 8 Program Are Adequate, Except When Conducting Quality Control Reviews of Its Routine Housing InspectionsHUD-OIG reviewed the controls over the Section 8 program of the Kansas City, Kansas, Housing Authority (Authority) to determine whether the Authority is operating its Section 8 program in accordance with U.S. Department of Housing and Urban Development (HUD) requirements. We reviewed the Authority because we had not conducted a review of its Section 8 program for more than 10 years and the Authority is one of the larger housing authorities in the Kansas City and regional area. The Authority has adequate controls over its Section 8 program, except when conducting quality control reviews of its routine Housing Quality Standards inspections. The Authority has adequate controls to ensure that its staff properly assesses tenant eligibility, assigns appropriate unit size, and calculates Section 8 subsidy payments. The Authority also has adequate controls over the inspectors' daily practices of conducting timely and well-documented inspections and enforcing corrective action when the inspector identifies violations. However, the Authority currently conducts its quality control inspections simultaneously with the routine inspections. This gives the inspector prior knowledge of the units that will be inspected for quality control purposes. The Authority agreed with our conclusion and recommendation, and plans to seek approval from its Board of Commissioners to amend its quality control plan to comply with HUD requirements. We recommend that the Director, Office of Public Housing, verify that the Authority amends its quality control plan to require that the Authority select and conduct quality control inspections separately from routine inspections. Issue Date: January 25, 2005 Title: Leader Mortgage Company Did Not Follow HUD Requirements When Processing LoansWe reviewed Leader Mortgage Company (Leader Mortgage), a non-supervised direct endorsement lender located in Lenexa, KS, because its default rate was significantly higher than the U.S. Department of Housing and Urban Development (HUD) Kansas City field office's average over the past three years. Our audit objectives were to determine whether Leader Mortgage properly originated Federal Housing Administration loans and to determine whether it properly developed and implemented a quality control plan. Leader Mortgage did not follow HUD requirements when processing and submitting loans for Federal Housing Administration insurance endorsement. It improperly originated 7 of the 23 loans reviewed. These seven loans contained deficiencies that affected the insurability of the loans, including unsupported assets, underreported liabilities, unsupported income, and derogatory credit. As a result, HUD insured seven loans that placed the insurance fund at risk for $911,738. Further, Leader Mortgage's quality control process did not comply with HUD requirements. Leader Mortgage's written quality control plan lacked many required elements. In addition, Leader Mortgage did not ensure that it obtained quality control reviews that met HUD requirements or that were completed within the established timeframes. Leader Mortgage also did not take prompt corrective action when quality control reports identified material deficiencies. As a result, HUD lacks assurance that Leader Mortgage is able to ensure the accuracy, validity, and completeness of its loan origination operations. We recommend that the Assistant Secretary for Housing - Federal Housing Commissioner, and Chairman, Mortgagee Review Board, take appropriate administrative action against Leader Mortgage based on the information contained in these findings. This action should, at a minimum, include requiring indemnification for the seven actively insured loans. Leader Mortgage should also reimburse the appropriate parties for unallowable costs charged to borrowers. Additionally, HUD should require Leader Mortgage to implement controls to ensure that it follows HUD's quality control requirements and verify that Leader Mortgage has implemented proper controls. Issue Date: June 4, 2003 Title: Meadowbrook Manor of Topeka Section 232 Nursing Home Review
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Content Archived: September 9, 2010 | |
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