Finding 1204971 (2025-002)

Finding 2025-002 – HOME Loans Affordable Period Monitoring Program: Home Investment Partnerships Program (HOME) Assistance Listing No.: 14.239 Federal Agency: Department of Housing and Urban Development (HUD) Passed Through: N/A – Direct Program Award Year: Fiscal Year 2024-2025 Compliance Requirement: Special Tests and Provisions Questioned Costs: $0 Criteria According to 24 Code of Federal Regulations (CFR) § 92.252, participating jurisdictions must enforce affordability requirements during the specified period through mechanisms such as regulatory agreements, deed restrictions, or similar instruments. This includes conducting on-site inspections of HOME-assisted rental housing to determine compliance with property standards and to verify information submitted by owners. Condition Seven instances were identified where the affordable period monitoring procedures were not performed by the County. Cause of Condition The Department experienced 100% staff turnover for HOME in 2023, and historical knowledge and organizational experience were lost at that time. Additionally, the United States Department of Housing and Urban Development (HUD) released a new final rule, the Housing Opportunity Through Modernization Act of 2016 (HOTMA), on February 14, 2023, which fundamentally changed monitoring requirements, but HUD did not issue any additional guidance for its grantees. As of today’s date, the guidance from HUD is promised, but still forthcoming. The new staff had difficulties interpreting how often monitoring must occur under the new regulations. Due to this fact, current staff incorrectly applied a three-year cycle to all monitoring activities, when the three-year cycle was specific to physical inspections. Repeat Finding Yes. Effect of Condition Noncompliance with timely monitoring may put the County into a higher risk category for monitoring from HUD. No new funds are expended with monitoring activities, so there is no risk of improperly misused funds; but monitoring each property to ensure HOME regulations are met is a requirement of the funding source. If a jurisdiction fails to ensure affordability requirements are being met, HUD can increase its oversight activities on the County or ultimately if affordability is lost and no remedies are viable, HUD could require repayment of all funding associated with the project. Recommendation Management should develop and implement a system and sufficient staffing levels to ensure HOME-assisted projects are properly monitored during the period of affordability. Each procedure performed should be documented and reviewed to ensure compliance with HOME regulations. The County should develop a standardized monitoring checklist for recordkeeping reviews, physical inspections, and regulatory compliance. A cloud-based tracking system (or similar options) should be used to maintain compliance records and send alerts for inspections. The County should continue to support staff’s efforts to identify and participate in relevant trainings, as they become available, to expand staff’s understanding of HUD regulations. If monitoring results in any corrective action plans, the County should consider providing technical assistance to property owners to support long-term compliance.