Finding Text
Criteria: Per HUD Handbook Multifamily Asset Management and Project Servicing (4350.01), Chapter 21-4 Section 2. Required Insurance For All HUD-Assisted and HUD-Held Multifamily Projects, “HUD Insured and HUD-Held Projects. Throughout the life of the mortgage insurance contract, the mortgagee of a HUD-insured project (or the Field Office Loan Management Branch Chief for a HUD-held project) must assure that the mortgagor maintains fire and other hazard (as determined by HUD) insurance on the property pledged as security for the loan.
Condition: During our testing of the Management Function, the Project could not provide general and liability insurance policies to assure that the Project maintains fire and hazard insurance on the property pledged as security for the loan.
Cause: Due to staff turnover, general & liability policies could not be located for testing of insurance coverage of the property.
Effect: The test of insurance could not be performed to determine whether liability coverage is sufficient with Chapter 21 of HUD Handbook 4350.1.
Recommendation: We recommend that the Project provide general & liability policies to determine liability coverage of the property during the audit period.
Views of Responsible Officials and Corrective Action Plan: No disagreements with the audit finding.