Finding Text
Finding 2022-001 - U.S. Department of Housing and Urban Development, Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects, Market Interest Rate, Assistance Listing #14.155
Statement of Condition: During the year ended June 30, 2022, the Corporation made thirteen payments on the mortgage payable, however, as of June 30, 2022 the Corporation was delinquent by two months of principal and interest. Additionally, the Corporation incurred late fees of $911 during the year ended June 30, 2022.
Criteria: The Loan Agreement and the Regulatory Agreement with HUD requires the Corporation to make all required payments of mortgage principal and interest by its due date.
Effect: Noncompliance with HUD regulations and mortgage default.
Cause: Vacancy and cash flow shortages.
Context: A test to compare the required mortgage payments to the actual mortgage payments was performed. The Corporation made thirteen payments on the mortgage payable, however, as of June 30, 2022 the Corporation was delinquent by two months of principal and interest.
Questioned Costs: $911
Recommendation: We recommend that management and the board of directors work to improve occupancy and submit special claims requests to HUD for vacant units to improve cash flow to ensure timely payment of the mortgage principal and interest payments.
Views of Responsible Officials and Corrective Action Plan: The board of directors acknowledges the required mortgage were not made. Effective June 1, 2023, the board of directors contracted with a new management company. The new management company is increasing advertising to fill vacancies and submitting special claims requests to improve the cash flow. Additionally, the new management company is working with the lender to make additional mortgage payments as cash flow permits.