Finding Text
Finding 2023-001 - 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, 2023, the Corporation made ten of the required monthly mortgage and escrow payments. Furthermore, the Corporation has two delinquent monthly mortgage payments from a prior year resulting in four total delinquent mortgage payments as of June 30, 2023. Additionally, the Corporation incurred late fees of $2,705 during the year ended June 30, 2023.
Criteria: The Loan Agreement and the Regulatory Agreement with HUD requires the Corporation to make all required monthly mortgage and escrow payments 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 and escrow deposits to the actual mortgage payments and escrow deposits was performed. During the year ended June 30, 2023, the Corporation made ten mortgage payments and escrow deposits. Additionally, the Corporation has two delinquent monthly mortgage payments from a prior year resulting in four total delinquent mortgage payments as of June 30, 2023.
Questioned Costs: $2,705
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 payments and escrow deposits.
Views of Responsible Officials and Corrective Action Plan: The board of directors acknowledges the required mortgage payments and escrow deposits 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 and escrow deposits as cash flow permits.