Finding Text
Criteria
Under the terms of the related regulatory agreement The Homes is required to make timely
monthly debt payments and deposits in certain escrow accounts.
Condition/Context
As part of our compliance testing, we reviewed the debt and escrow schedules and noted that
the debt payments and escrow payments due in February through December of 2022 were not
made.
Cause
The Homes was experiencing significant cash constraints and was not able to make debt
payments and escrow payments as they were due and was limited under the terms of the
bankruptcy filing as to what payments were allowable.
Effect
The Homes is out of compliance with the HUD regulatory agreement.
Recommendation
As HUD servicer is a named secured creditor in the bankruptcy filing, we recommend that The
Homes follow the rules of the bankruptcy filing.
Management Response
The HUD mortgage is a secured creditor under the bankruptcy filing and we expect the lender
to be paid under the terms of the bankruptcy agreement at the conclusion of the sale of the
Facility that is expected to occur during 2024.