Dear Mr. Waguespack:The Division of Administration, Louisiana Office of Community Development (OCD) submits the following in response to the audit finding titled "Inadequate Recovery of Small Rental Property Program Loans."The Small Rental Property Program (SRPP) has two tiers of compliance obligati...
Dear Mr. Waguespack:The Division of Administration, Louisiana Office of Community Development (OCD) submits the following in response to the audit finding titled "Inadequate Recovery of Small Rental Property Program Loans."The Small Rental Property Program (SRPP) has two tiers of compliance obligations. The federal compliance requirements are for the CDBG funds issued to a borrower to meet a National Objective and be expended on an Eligible Activity. On top of the federal requirements, the State has its own program requirements. Upon the initial placement of an eligible tenant in a habitable unit at a restricted rent amount, the U.S. Department of Housing and Urban Development (HUD) requirements have been satisfied. Most of the matters made the subject of your report deal with the borrower's non-compliance with the State's program rules, not the HUD requirements.OCD has allocated approximately $649 million to the SRPP program to fund approximately 4,500 applicants and we maintain an ongoing monitoring process to promote compliance and continued availability of affordable housing. Consistent with the program's mission of preserving and expanding much needed affordable housing, OCD's primary focus for the SRPP is to assist property owners in achieving and maintaining compliance, i.e., creating and continuing affordable housing opportunities, as opposed to foreclosure and/or recapture of funds, and are, therefore, not subject to recapture by HUD.In summary, as of June 30, 2022, the LLA reports that 1,156 applicant files have been identified as noncompliant. Of these, 163 files have been determined to be uncollectible, leaving 993 files that are actively being addressed. OCD's compliance and repayment efforts relating to the state imposed continuing requirements of the program are ongoing. See corrective action plan for footnote. The optimal outcome of these efforts is the continued availability of affordable housing through compliance.In June 2016, OCD, working with the Louisiana Housing Corporation (LHC) and HUD, identified 397 SRPP borrowers that did not meet a National Objective. Immediately thereafter, OCD's Legal Section and LHC program staff began communicating with non-compliant borrowers and evaluating proposed workouts. OCD sent default letters to and initiated recapture efforts on all borrowers. Each file is processed with a goal of either achieving compliance, securing repayment, or identifying another viable workout plan. As of June 30, 2022, of the 397 files identified, 76 borrowers have become compliant, 14 have either partially or fully repaid their loans, 18 borrowers have transferred their housing obligations to other compliant properties and 28 have been determined uncollectable for various reasons. As noted in the audit, OCD continues to seek technical assistance regarding the enforcement of mortgages through the judicial foreclosure/public auction process.In conclusion, OCD will continue the efforts to recover those loans determined to be ineligible in accordance with policies and procedures that are acceptable to HUD. Concurrently, OCD will also continue to assist rental property owners to become compliant and to resolve any program compliance issues, thus increasing available affordable rental housing and reducing or eliminating the need to recapture funds from rental property owners, where appropriate.The contact person responsible for the corrective action is Ginger Moses, OCD Chief Operating Officer. Once approved by HUD, the anticipated completion date for this corrective action plan will coincide with the closing of the SRPP program.If you have questions or require additional information, please feel free to contact me.