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Minnesota Audit Reports
Date Issue: March 31, 2006 The U.S. Department of Housing and Urban Development's Office of
Inspector General audited US Bank NA (US Bank), a supervised lender
approved to originate, underwrite, and submit insurance endorsement
requests under HUD's single family direct endorsement program. The
audit was part of the activities in our fiscal year 2005 annual
audit plan. We selected US Bank for audit because of its high late
endorsement rate. Our objectives were to determine whether US Bank
complied with HUD's regulations, procedures, and instructions in
the submission of insurance endorsement requests and underwriting
of Federal Housing Administration loans. US Bank did not always comply with HUD's requirements regarding
late requests for insurance endorsement. It improperly submitted
67 (1.52 percent) late requests for endorsement out of 4,406 loans
tested. The loans were either delinquent or otherwise did not meet
HUD's requirements of six monthly consecutive timely payments after
delinquency but before submission to HUD. US Bank also incorrectly
certified that both the mortgage and escrow accounts for six loans
and the escrow accounts for taxes, hazard insurance, and mortgage
insurance premiums for 14 loans were current when they were not. Further, US Bank inappropriately underwrote 13 Federal Housing
Administration loans out of 28 loans reviewed and which went to
claim. It included unallowable amounts (overdue principal, interest,
and late charges) when determining the debt for six streamline refinanced
loans and therefore these loans exceeded HUD's maximum insurable
limits by $6,910; approved seven purchase loans when required documentation
was missing, out of date, or not adequate to support the income
of the borrowers; and understated the borrowers' expenses for three
loans. For the 13 loans' certifications reviewed, US Bank incorrectly
certified the integrity of the data supplied by other lenders used
to determine the quality and insurance eligibility of one loan,
and that due diligence was used in underwriting the remaining 12
loans even though it was not. These improperly submitted and inappropriately underwritten loans
increased the risk to HUD's Federal Housing Administration insurance
fund. We recommend that HUD's assistant secretary for housing-federal
housing commissioner require US Bank to indemnify HUD for any future
losses on 14 loans (12 active loans with certifications which violated
the Program Fraud Civil Remedies Act and 2 active loans which violated
HUD's Mortgagee Letter 2005-23) with a total mortgage value of more
than $1.5 million, reimburse HUD nearly $455,000 for the actual
losses it incurred on 14 loans (three improperly submitted and 11
inappropriately underwritten) and for any future losses from more
than $129,000 in claims paid on three loans (two improperly submitted
and one inappropriately underwritten) once the properties are sold,
and implement adequate procedures and controls to address the deficiencies
cited in this report. We also recommend that HUD's assistant secretary
for housing-federal housing commissioner take appropriate action
against US Bank for violating the requirements in effect at the
time when it submitted 18 loans with a mortgage value of more than
$2 million without the proper six month payment histories. In addition, we recommend that HUD's associate general counsel
for program enforcement determine legal sufficiency and if legally
sufficient, pursue remedies under the Program Fraud Civil Remedies
Act against US Bank and/or its principals for the incorrect certifications
cited in this audit report. Date Issued: September 16, 2004 Title: Legacy Management and Development Corporation, Multifamily Equity Skimming, Edina, MinnesotaHUD's Office of Inspector General reviewed the books and records of Legacy Management and Development Corporation. We performed the review to determine whether Legacy Management used Projects' funds in compliance with the Regulatory Agreements and HUD's requirements. Legacy Management inappropriately used $305,038 from or six Projects under its management. The inappropriate payments included $70,239 in double-billings, $34,412 in over-charges, $2,778 for work claimed while employees were absent, and $197,609 in charges for maintenance tasks that were not itemized. The inappropriate payments occurred while most Projects were in a non-surplus cash position, and consequently, was no longer available for the operation and repair of the Projects. We recommend that HUD's Director of Multifamily Housing Hub, Minneapolis Field Office, ensure Legacy Management and Development Corporation reimburses HUD $305,038 for the inappropriate payments cited in this audit memorandum. We recommend that HUD's Director of Multifamily Housing Hub in conjunction with HUD's Office of Inspector General pursue a double damages remedy if Legacy Management does not reimburse HUD for the inappropriate payments cited in this audit memorandum. We also recommend that HUD's Director of Departmental Enforcement Center: pursues administrative sanctions against Legacy Management for the inappropriate payments cited in this audit memorandum; and imposes civil money penalties against Legacy Management for the inappropriate payments cited in this memorandum while the Projects were in a non-surplus cash position. Date Issued: April 14, 2004 Title: Minneapolis Public Housing Authority Supplemental Police
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