Finding Text
Finding 2024-001 - 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, 2024, the Corporation made twelve payments on the mortgage payable, however, as of June 30, 2024 the Corporation was delinquent by four months of principal and interest from a prior year. Additionally, the Corporation incurred late fees of $2,127 during the year ended June 30, 2024.
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, 2024, the Corporation made twelve mortgage payments and escrow deposits, however, as of June 30, 2024 the Corporation was delinquent by four months of principal and interest.
Questioned Costs: $2,127
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, the new management company is working with the lender to make additional mortgage payments and escrow deposits as cash flow permits.