Finding Text
Finding 2025-001 - 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, 2025, the Corporation made fifteen monthly mortgage and escrow payments, however, as of June 30, 2025 the Corporation was delinquent by one monthly mortgage and escrow payment. Additionally, the Corporation incurred late fees of $2,321 during the year ended June 30, 2025. 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, 2025, the Corporation made fifteen mortgage payments and escrow deposits, however, as of June 30, 2025 the Corporation was delinquent by one monthly mortgage payment and escrow deposit. Questioned Costs: $2,321 Recommendation: We recommend that management and the board of directors continue to 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, in July 2025, the Corporation executed a reinstatement agreement with the lender to make additional monthly mortgage payments of $1,000 through May 2026 to bring the mortgage to current.