oversight

Golden Feather Realty Services, Inc. Single Family Property Disposition Program Management and Marketing Services Contract (C-OPC-21322), Irvine, CA

Published by the Department of Housing and Urban Development, Office of Inspector General on 2000-09-22.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                  AUDIT REPORT




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           GOLDEN FEATHER REALTY SERVICES, INC.
       SINGLE FAMILY PROPERTY DISPOSITION PROGRAM
          MANAGEMENT AND MARKETING SERVICES
                  CONTRACT (C-OPC-21322)

                   IRVINE, CALIFORNIA

                       00-SF-222-1002

                    SEPTEMBER 22, 2000

                OFFICE OF AUDIT, PACIFIC/HAWAII
                  SAN FRANCISCO, CALIFORNIA
EXIT
                                                                   Issue Date
                                                                           September 22, 2000

                                                                   Audit Case Number
                                                                           00-SF-222-1002




       TO:            Joseph C. Bates
TOC                   Director, Santa Ana Homeownership Center, 9JHH



EXIT
       FROM:          Mimi Y. Lee
                      District Inspector General for Audit, 9AGA

       SUBJECT:       Golden Feather Realty Services, Inc.
                      Single Family Property Disposition Program
                      Management and Marketing Services Contract (C-OPC-21322)
                      Irvine, California


       As part of OIG’s nationwide review of HUD’s Management and Marketing (M&M) Services
       contracts, we audited Golden Feather Realty Services, Inc’s. (GFR) disposition of HUD- owned
       properties. This report contains two findings.

       Within 60 days, please furnish us for each recommendation in this report, a status report on (1)
       corrective action taken, (2) the proposed corrective action and the date to be completed, or (3) why
       action is considered as necessary. Also, please furnish us copies of any correspondence or directives
       issued because of the audit.

       Should you have any questions, please contact Ruben Velasco, Assistant District Inspector General for
       Audit, at (213) 894-8016.
       Management Memorandum




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       00-SF-222-1002                  Page ii
TOC    Executive Summary
       As part of OIG’s nationwide review of HUD’s Management and Marketing (M&M) Services
       Contracts, we audited Golden Feather Realty Services, Inc.’s disposition of single family HUD-owned
       properties. The purpose of our audit was to determine whether GFR managed and marketed single
       family HUD-owned properties in accordance with its M&M contract, and other HUD requirements.

       We determined that GFR generally managed and marketed single family HUD-owned properties in
       accordance with its M&M contract and other HUD requirements. We particularly noted GFR
       significantly reduced the number of HUD-owned properties in the Southern California inventory from
       almost 13,000 as of April 1999, to about 7,000 as of March 2000. However, as discussed in the two
       findings contained in this report, GFR needs to fully comply with certain aspects of its property
       disposition activities.




       Golden Feather Realty Did Not         Golden Feather Realty (GFR) did not always adequately
EXIT   Always Adequately Protect,            protect, preserve, and maintain HUD-owned properties. Our
       Preserve, and Maintain HUD-           site inspections of 30 selected properties within the Los Angeles
       owned Properties                      and San Bernardino, California areas disclosed that GFR did
                                             not always:

                                             •   correct health and safety hazards and remove defective
                                                 paint surfaces;

                                             •   protect properties from the elements to prevent further
                                                 deterioration;

                                             •   repair damages caused by routine vandalism;

                                             •   secure properties against unauthorized entry; and

                                             •   remove debris and maintain the lawns in order to maintain
                                                 the physical appearance of the properties.

                                             As a result, these conditions reflected a negative image of
                                             HUD’s REO program, but more importantly, it hampered
                                             HUD’s efforts to fully accomplish its mission of strengthening
                                             neighborhoods and communities. HUD was also less assured
                                             that sales of HUD-owned properties provided the maximum
                                             return to the mortgage insurance fund. GFR’s lack of written
                                             procedures did not ensure adverse conditions found during

                                                 Page iii                                       00-SF-222-1002
       Executive Summary


                                        property inspections were accurately and consistently reported.
                                        The lack of follow-up action did not assure needed repair items
                                        identified were resolved timely and adequately.

       Golden Feather Realty Did Not    Golden Feather Realty incurred delays in processing sales of
       Always Meet Required Time        HUD-owned properties in 24 of 45 HUD-owned properties
       Frames for Processing Sales of   reviewed. These delays occurred during (1) performing initial
       HUD-owned Properties             inspections, (2) obtaining appraisals, (3) approving disposition
                                        programs, and (4) reviewing sales contracts.

                                        Consequently, the delays caused these properties to remain in
                                        HUD’s real estate owned property inventory longer than
                                        necessary. As a result of the delays, it could also increase
                                        property holding costs and exposure to deterioration or damage
                                        due to vandalism. Lack of knowledge and management
                                        emphasis of contract requirements, as well as staff
                                        misinterpretation of HUD regulations, caused GFR to incur the
EXIT                                    delays.

       Auditee comments                 We discussed the findings with GFR officials during the audit
                                        and at a September 11, 2000 exit conference. We provided
                                        GFR with a draft copy of Finding 1 on July 19, and draft copy
                                        of Finding 2 on August 3, 2000 for their comments. We
                                        received GFR’s response to Finding 1 on August 7, and
                                        Finding 2 on August 16, 2000. GFR generally disagreed with
                                        both findings. We considered GFR’s comments and revised
                                        the findings where appropriate. The responses and our
                                        evaluation are discussed in the Findings and the full text of their
                                        responses are included as Appendix B.

       Recommendations                  We recommend HUD’s Santa Ana Homeownership Center
                                        (SAHOC) require GFR to fully comply with its M&M contract
                                        to ensure that HUD-owned properties are always adequately
                                        protected, preserved and maintained, as well as marketed and
                                        sold in a timely manner. We included specific recommendations
                                        at the end of each finding to correct the noted deficiencies.




       00-SF-222-1002                        Page iv
       Table of Contents

       Management Memorandum                                                         i



       Executive Summary                                                            iii



       Introduction                                                                 1



       Findings

       1     Golden Feather Realty Did Not Always Adequately Protect,
EXIT         Preserve, And Maintain HUD-owned Properties                            5


       2     Golden Feather Did Not Always Meet Required Time Frames
             For Processing Sales Of HUD-owned Properties                          23



       Management Controls                                                         31



       Follow Up On Prior Audits                                                   33



       Appendices
           A Results of OIG Site Inspections                                       35

           B Auditee Comments                                                      37


           C Distribution                                                          59




                                       Page v                           00-SF-222-1002
       Table of Contents




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       00-SF-222-1002                   Page vi
TOC    Introduction
       Program Background              Federal Housing Administration’s (FHA) Single Family
                                       Mortgage Insurance Program helps low and moderate income
                                       families become homeowners by reducing downpayments and
                                       limiting lender fees. FHA insures the loans on the homes. HUD
                                       acquires single family properties (one-to-four family residential
                                       units) as a result of foreclosure of FHA-insured mortgages or
                                       special acquisitions. Following foreclosure, mortgage lenders
                                       have the right to deed the properties to the Secretary of HUD in
                                       exchange for mortgage insurance benefits.

                                       HUD disposes acquired properties through its Property
                                       Disposition Program, administered through its Single Family
                                       Housing Real Estate Owned Division. Its mission is to reduce
                                       the property inventory in a manner that expands
                                       homeownership opportunities, strengthens neighborhoods and
                                       communities, and ensures a maximum return to the mortgage
EXIT                                   insurance fund. Effective March 29, 1999, HUD contracted out
                                       for the management and marketing of Real Estate Owned
                                       (REO) properties. HUD awarded seven privately owned
                                       companies a total of 16 contracts to manage and market REO
                                       properties nationwide.

       M&M Contractor-Golden           Golden Feather Realty Services, Inc. was awarded M&M
       Feather Realty Services, Inc.   contracts for the disposition of HUD-owned properties. GFR
                                       assumed full responsibility for the management and marketing
                                       functions. HUD’s primary role is to monitor GFR’s compliance
                                       with its contracts. The primary objective of the M&M contract
                                       is to ensure HUD-owned properties are: (1) protected and
                                       preserved; (2) properly managed, evaluated, and marketed in a
                                       manner which produces the highest possible return to HUD’s
                                       mortgage insurance fund; and (3) maintained to ensure the
                                       overall program and the image of HUD is positive and
                                       complaints are minimal.




                                            Page 1                                        00-SF-222-1002
       Introduction


                                      HUD awarded the following M&M contracts to Golden
                                      Feather Realty Services, Inc.:

                                          Contract        Amount                 Area Covered
                                          Number
                                       C-OPC-21322      $43,659,695    Southern California
                                       C-OPC-21336      $12,904,375    Northern California
                                       C-OPC-21520      $ 5,260,039    Oregon, Idaho and Washington
                                       C-OPC-21519      $20,047,077    Illinois, Indiana, Kentucky, and
                                                                       Tennessee
                                       TOTAL            $81,871,186


                                      GFR’s corporate headquarters office is located in San Antonio,
                                      Texas, and its corporate operations offices are located in
                                      Phoenix, Arizona and Plano, Texas. Its regional offices are
                                      located in Sacramento and Irvine, California; Chicago, Illinois;
                                      and Milton, Washington.

EXIT
       Audit Objectives, Scope, And   The objective of our audit was to determine whether GFR
       Methodology                    managed and marketed single family HUD-owned properties in
                                      accordance with its M&M contract, and other pertinent HUD
                                      requirements.

                                      To accomplish our objectives we performed the following:

                                      ü Reviewed pertinent HUD regulations, Southern California’s
                                        M&M Contract, and other HUD requirements;

                                      ü Interviewed Santa Ana Homeownership Center officials
                                        and reviewed relevant monitoring files to obtain an
                                        understanding of policies and practices for carrying out
                                        REO program activities;

                                      ü Interviewed GFR officials and staff to obtain an
                                        understanding of procedures and practices for carrying out
                                        their responsibilities under the M&M contract;

                                      ü Analyzed property sales statistics to determine whether
                                        GFR met REO missions and goals;

                                      ü Reviewed a sample of 10 judgmentally selected Held off
                                        Market properties to determine whether GFR was taking

       00-SF-222-1002                      Page 2
                                                        Introduction


          appropriate action to resolve the problems preventing the
          properties from being marketed and sold;

       ü Reviewed a sample of 15 judgmentally selected properties
         closed within the last six months ending March 31, 2000 to
         determine whether GFR complied with sales requirements;

       ü Conducted site inspections and reviewed files of 30
         randomly selected properties in the two cities that had the
         largest inventories of HUD-owned properties to determine
         whether GFR protected, preserved, and maintained
         properties, as well as complied with required time frames
         for processing these properties;

       ü Reviewed a sample of vouchers for pass-through expenses
         and fixed fees to determine whether GFR complied with
         procedures for the payment of services;
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       ü Reviewed subcontracting procedures to determine whether
         GFR complied with HUD requirements; and

       ü Reviewed bidding and purchasing processes to determine
         whether GFR complied with HUD requirements.

       Our audit generally covered the period April 1999 through
       March 2000. Where appropriate, we extended our review to
       cover other periods. We performed our audit field work
       between April and July 2000.

       We conducted the audit in accordance with generally accepted
       government auditing standards.




           Page 3                                      00-SF-222-1002
       Introduction




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       00-SF-222-1002                Page 4
                                                                                                 Finding 1



TOC            Golden Feather Realty Did Not Always
              Adequately Protect, Preserve, And Maintain
                       HUD-owned Properties
       Contrary to the provisions of its management and marketing contract, Golden Feather Realty
       (GFR) did not always adequately protect, preserve, and maintain HUD-owned properties. Our
       site inspections of 30 selected properties within the Los Angeles and San Bernardino,
       California areas disclosed that GFR did not always:

          •   correct health and safety hazards and remove defective paint surfaces;

          •   protect properties from the elements to prevent further deterioration;

          •   repair damages caused by routine vandalism;

EXIT      •   secure properties against unauthorized entry; and

          •   remove debris and maintain the lawns in order to maintain the physical appearance of
              the properties.

       As a result, these conditions reflected a negative image of HUD’s REO program, but more
       importantly, it hampered HUD’s efforts to fully accomplish its mission of strengthening
       neighborhoods and communities. HUD was also less assured that sales of HUD-owned
       properties provided the maximum return to the mortgage insurance fund. GFR’s lack of
       written procedures did not ensure adverse conditions found during property inspections were
       accurately and consistently reported. The lack of follow-up action did not assure needed
       repair items identified were resolved timely and adequately.




       GFR is responsible for              The Management and Marketing Services Contract between
       managing and marketing HUD-         HUD and GFR, states GFR shall provide all facilities, materials,
       owned properties                    supplies, equipment labor, and services required to successfully
                                           manage single family (1-4 units) properties which are HUD-
                                           owned Properties and to successfully market these properties.
                                           In part, the primary objectives of the contract are to ensure
                                           HUD-owned properties are: (1) protected and preserved; (2)
                                           properly managed, evaluated, and marketed in a manner which
                                           produces the highest possible return to HUD’s mortgage

                                                Page 5                                      00-SF-222-1002
       Finding 1


                                          insurance fund; and (3) maintained to ensure the overall program
                                          and the image of HUD is positive and complaints are minimal.

                                          Section C-2 (V) of the M&M Contract outlined tasks applicable
       GFR must protect, preserve
                                          to each of the assigned properties and states that GFR shall
       and maintain HUD-owned
                                          perform each task applicable to each specific property,
       properties
                                          depending upon its current processing stage. Unless otherwise
                                          specifically stated, the Contractor’s actions shall be timely so as
                                          to eliminate any hazardous conditions, to preserve and protect
                                          properties, to maintain properties in a presentable condition at all
                                          times, and to enable timely marketing and sales.

                                          The Contractor must in any event maintain each property in such
                                          a way as to prevent any deterioration in condition or value to the
                                          property between the time that it is assigned the property and the
                                          time it conveys the property to a purchaser. This would include
                                          any repair necessitated by the proximate omission to properly
EXIT                                      inspect, preserve, protect, or maintain the property.

       Bad conditions existed in all 30   We selected and conducted site inspections of 30 HUD-owned
       properties inspected               properties in the Los Angeles and San Bernardino, California
                                          areas which were being processed for disposition and sales.
                                          Contrary to the specific requirements contained in its M&M
                                          contract with HUD, GFR did not adequately protect, preserve
                                          and maintain the HUD-owned properties in all 30 properties
                                          which we inspected. The graph on the next page summarizes the
                                          results of our inspections by deficiencies. (Appendix A also lists
                                          a detailed breakdown of the properties inspected and the type of
                                          deficiencies noted.)




       00-SF-222-1002                          Page 6
                                                                                                                            Finding 1


                                                  Deficiencies Identified During OIG's Inspections



              25




              20
                     12




              15

                                   6



              10                                                                                            8

                                                                  5
                                                   6

                     13                                                         5
                                                                                              0
               5                   10

EXIT                                               5
                                                                  6                           6             6
                                                                                4

               0
                    Safety   Defective Paint   Exposed to    Damage Due     Unsecured   Exterior Debris     Lawn
                   Hazards       (53%)          Elements     to Vandalism     (30%)         (20%)        Maintenance
                    (83%)                         (37%)          (37%)                                  Needed (47%)

                                                        Los Angeles    San Bernardino




                                                            Details of deficiencies found during our site inspections are
                                                            discussed separately as follows:

                                                            GFR did not remove health and safety hazards (25 of 30
                                                            properties - 83%)

       Health and safety hazards were                       The M&M Contract requires GFR to correct ANY condition
       present in over 80% of the                           that presents a health or safety hazard to the public or to the
       properties inspected                                 property within 24 hours of discovery. This would include repair
                                                            of broken steps or floorboards, removal of hazardous material
                                                            such as gasoline cans or oil-soaked rags, or removal or dead
                                                            animals or feces.

                                                            Our inspections, however, disclosed conditions that posed
                                                            health and safety hazards in 25 of the 30 (83%) properties
                                                            inspected, including multiple hazards found for some of the
                                                            properties. We reviewed GFR inspection reports that took

                                                                  Page 7                                               00-SF-222-1002
       Finding 1


                                       place just before and after our inspections to determine whether
                                       the hazards had been identified by GFR’s inspectors. We found
                                       none of the hazards that we identified had been reported by
                                       GFR’s inspectors, and thus, not subsequently corrected. The
                                       following are examples of hazardous conditions noted during our
                                       inspections:

                                       4       frayed and unsafe electrical wiring to the building, thus
                                               creating a fire and safety hazard;

                                       4       severely water damaged ceiling and about to collapse;

                                       4       a garage roof support beam that was severely split and
                                               very hazardous (See Photo 1);

                                       4       missing electrical panel box covers that left exposed
                                               wiring, thus creating a fire and safety hazard (See Photo
EXIT                                           2);

                                       4       sewer openings from missing toilets that needed to be
                                               capped to prevent sewer gas from entering the
                                               properties; and ,

                                       4 rotted flooring that was unsafe and dilapidated and fire
                                         damaged exterior stair case that was unsafe (See Photo 3).

                                       In our opinion, the failure to ensure health and safety hazards are
       Uncorrected health and safety   identified and corrected unnecessarily expose HUD and/or GFR
       hazards expose HUD and GFR      to potential liability. A GFR official attributed the deficient
       to potential liability          inspections to oversight by the inspectors and GFR’s lack of a
                                       quality control procedure to evaluate the thoroughness and
                                       quality of the inspections. He also agreed these types of items
                                       should be reported by the inspectors and should be corrected
                                       promptly.




       00-SF-222-1002                       Page 8
                                                                                               Finding 1




EXIT
       Photo 1: (041-941005) Garage support beam is severely split and very hazardous. GFR’s inspection
       reports did not identify any safety hazards at the property.




       Photo 2: (041-934020) Electrical panel box cover is missing, thus leaving the wiring exposed and
       creating a fire and safety hazard. GFR’s inspection reports did not report this deficiency.



                                                Page 9                                    00-SF-222-1002
       Finding 1




       Photo 3: (041-963632) Rear stair case to the upper level unit is deteriorated and fire damaged,
EXIT   leaving it structurally unsafe. GFR’s inspection reports did not report this deficiency.


                                              GFR did not remove defective paint surfaces (16 of 30
                                              properties - 53%)

                                              Our inspections disclosed 16 of 30 (53%) properties contained
       GFR did not remove harmful
                                              defective (flaking, chipping, or peeling) paint surfaces. Since the
       paint surfaces
                                              properties were built prior to 1978, they were potentially lead-
                                              based. If ingested, lead based paint could be harmful to children
                                              and others.

                                              We reviewed GFR’s inspection reports and found its inspectors
                                              did not identify the defective paint surfaces. This omission
                                              allowed this potentially harmful condition to be uncorrected. To
                                              illustrate, a property built in 1964 had extensive chipping and
                                              peeling paint on the exterior surfaces that was very obvious (See
                                              Photo 4), yet, GFR inspectors did not identify this problem.
                                              Similarly, we inspected another property which was built in 1920
                                              and noted peeling paint on interior surfaces in one of the rooms
                                              that was very noticeable. GFR’s inspection report again did not
                                              identify this problem.




       00-SF-222-1002                              Page 10
                                                                                                       Finding 1




EXIT
       Photo 4: (046-674157) Exterior surfaces had extensive chipping and peeling paint. GFR’s
       inspection reports did not identify any defective paint at the property.

                                            GFR did not adequately protect properties from the
                                            elements to prevent further deterioration (11 of 30
                                            properties - 37%)

                                            The M&M Contract requires GFR to protect the property from
                                            damage from the elements, through such measures as repairing
                                            broken windows, patching roof leaks, and replacing functional
                                            shutters.

       GFR’s inaction caused                GFR did not adequately protect properties from the elements to
       properties to further deteriorate    prevent further deterioration in 11 of 30 (37%) properties we
                                            inspected. At one property, both buildings had suffered
                                            extensive water damage due to deteriorated and leaking roofs.
                                            Ceilings and sub-floors had caved in on the affected areas (See
                                            Photo 5). GFR’s February 17, 2000 inspection report disclosed
                                            the roof was leaking and it needed a tarp. OIG inspected this
                                            property on May 3, 2000, and noted the same problem. GFR
                                            re-inspected the property one week after OIG’s inspection and
                                            reported further damage to the roof requiring extensive repairs.
                                            A GFR official agreed that GFR is responsible for preventing
                                            further deterioration to the properties, but claimed it was difficult

                                                 Page 11                                         00-SF-222-1002
       Finding 1


                                        to determine whether roofs are actively leaking or not. As
                                        illustrated in this particular case, however, GFR initially
                                        determined the roof was actively leaking and required patching,
                                        but did not repair the damaged roof immediately to prevent
                                        further deterioration.




EXIT




       Photo 5: (041-984016) Property suffered extensive damage due to active roof leaks. GFR’s
       inspection reports identified the need for repairs, but did not correct the problem.

                                        GFR did not repair damages or replaced missing
                                        appliances caused by routine vandalism (11 of 30
                                        properties - 37%)

                                        The M&M Contract requires GFR to repair all damages due to
                                        vandalism. The GTR may authorize reimbursement for repairs
                                        due to extraordinary acts of vandalism. Damages caused by
                                        routine vandalism such as broken windows, spray paint to the
                                        exterior or interior of the home, and theft of appliances, do not
                                        qualify as pass through expenses.

       GFR did not repair damages       GFR did not repair damages caused by routine vandalism in 11
       caused by routine vandalism as   of 30 (37%) properties including graffiti and missing appliances
       required                         and other items such as sinks, toilets, water heaters, and light
                                        fixtures. For example, at one property we inspected, the interior
                                        showed extensive graffiti throughout (See Photo 6). GFR
       00-SF-222-1002                       Page 12
                                                                                                     Finding 1


                                           inspected the property on or about the same time that we made
                                           the property inspection. However, GFR’s inspection report did
                                           not disclose any evidence of vandalism or graffiti. This shows
                                           that GFR inspectors were not accurately reporting the actual
                                           condition of the properties.




EXIT




       Photo 6: (048-084891) Property suffered extensive vandalism and graffiti throughout the interior.
       GFR’s inspection reports did not identify any damages caused by vandalism.

                                           We inspected another property which showed evidence of
                                           extensive graffiti on the exterior (See Photo 7). GFR’s
                                           inspection reports just prior to our inspection also identified that
                                           graffiti was present on the exterior walls and garage area.
                                           However, when we re-inspected the property, we found
                                           extensive graffiti was still present. Therefore, even when GFR
                                           inspectors identify the need for repairs, these deficiencies were
                                           not being corrected.




                                               Page 13                                         00-SF-222-1002
       Finding 1




EXIT
       Photo 7: (041-963632) Property exterior showed evidence of graffiti. GFR’s inspection reports
       did not identify the need for any graffiti removal.



       GFR’s inspection reports did not         We inspected another property which showed evidence of
       identify missing items                   vandalism. The bathroom sink, vanity, and toilet had been
                                                missing after it was conveyed to HUD (See Photo 8).
                                                GFR’s inspection reports just before and after our inspection
                                                did not identify any missing items. Therefore, we question the
                                                thoroughness of the inspections because these types of
                                                deficiencies could not be easily missed by GFR inspectors.




       00-SF-222-1002                            Page 14
                                                                                                   Finding 1




EXIT
        Photo 8: (197-041029) Property showed evidence of vandalism because of the missing bathroom sink,
        vanity, and toilet. GFR’s inspection reports did not identify any missing items.


       GFR misinterpreted contract          A GFR official stated he interpreted GFR’s contract to be
       requirements to repair damages       responsible only for minor problems, such as replacing a broken
       from routine vandalism               window or removing minor graffiti. He also stated, in his
                                            opinion, theft of sinks, toilets, and water heaters, or major
                                            graffiti, are considered extraordinary vandalism, and therefore,
                                            not GFR’s responsibility. The contract language was clear with
                                            respect to what is considered routine vandalism, therefore, GFR
                                            should be held responsible for replacing the missing appliances.

                                            GFR did not secure properties against unauthorized entry
                                            (9 of 30 properties - 30%)

                                            The M&M Contract requires GFR to secure the properties to
                                            prevent unauthorized entry using a locking system acceptable to
                                            the GTR.

        GFR did not fully secure            GFR did not fully secure properties against unauthorized entry in
        properties to prevent               9 of the 30 (30%) properties we inspected. We found doors to
        unauthorized entry                  properties or garages that were unlocked, missing padlocks, or
                                            contained broken padlocks. For example, at one property, we

                                                 Page 15                                      00-SF-222-1002
       Finding 1


                                  found the front door padlock to the upper level unit was missing
                                  and showed evidence that someone may be living inside. After
                                  we completed our inspections, we advised GFR that the unit was
                                  unsecured. Subsequently, GFR informed us that it had been re-
                                  secured. However, when we re-inspected the property, we
                                  found the padlock was still missing.

                                  GFR did not maintain the physical appearance of the
                                  properties (6 of 30 properties - 20%)

                                  The M&M Contract requires GFR to remove and properly
                                  dispose all interior and exterior debris both after property
                                  conveyance and on a continual basis.

       GFR did not remove trash   GFR did not maintain the physical appearance of the properties
       and debris                 by removing exterior trash and debris in 6 of 30 (20%)
                                  properties we inspected. For example, we found extensive trash
EXIT                              and debris scattered throughout the exterior (See Photo 9).
                                  GFR’s inspection report one week after our inspection identified
                                  the need to remove trash and debris. However, when we re-
                                  inspected the property, the trash and debris were still present. A
                                  GFR official agreed GFR is responsible for ensuring that the
                                  properties should be free of trash and debris, but again attributed
                                  this problem to oversight and lack of a quality control procedure
                                  to monitor the thoroughness and quality of the inspections.
                                  Keeping the properties free of debris is an integral part of
                                  strengthening the appearance of the neighborhood.




       00-SF-222-1002                 Page 16
                                                                                                   Finding 1




EXIT
       Photo 9: (197-041029) Property had extensive trash and debris on the exterior. GFR’s
       inspection reports did not report any debris.


                                            GFR did not adequately maintain the lawns (14 of 30
                                            properties - 47%).

                                            The M&M Contract requires GFR to maintain lawn, shrubbery
                                            and trees consistent with neighborhood standards.

       Lawns in almost half the             We found in 14 of 30 (47%) properties inspected, GFR did not
       properties inspected needed to       adequately maintain the lawns. For example, at one property
       be cut                               (See Photo 10), we observed the back lawn was overgrown and
                                            had not been cut recently. GFR’s inspection reports immediately
                                            before and after our inspection did not identify that the lawn
                                            needed to be cut.

                                            We also noted in many cases, it appeared the front lawns of
                                            properties were being cut, but the back lawns were being
                                            neglected. A GFR official said the lawns are supposed to be cut
                                            every two weeks, and agreed that both front and back yard
                                            lawns should be cut. Keeping the property free of debris is also
                                            an integral part of strengthening the neighborhoods, instead of
                                            allowing the properties to become eyesores.

                                                Page 17                                       00-SF-222-1002
       Finding 1




EXIT
       Photo 10: (048-095005) Property has not had the back lawn cut recently. GFR’s inspection
       reports did not report that the lawn needed to be cut.



       Bad property conditions caused       The deficiencies found during our inspections not only violated
       a negative image of HUD’s            GFR’s M&M Contract with HUD but also reflect negatively on
       REO program                          HUD’s REO program. More importantly, these conditions
                                            hampered HUD’s efforts to meet its mission of strengthening
                                            neighborhoods and communities. In addition, the deteriorated
                                            condition of the properties may cause a decline in property
                                            values, thereby, reducing the maximum return to the mortgage
                                            insurance fund.

       Inspections were deficient due       Deficient property inspections occurred because GFR either did
       to lack of written and quality       not (1) accurately identify and report repairs or corrective action
       control procedures                   needed, or (2) ensure the identified deficiencies were corrected
                                            promptly. In addition, the lack of a quality control procedure to
                                            perform or monitor the quality of the inspections was also a
                                            contributing factor. We discussed the results of our inspections
                                            with a GFR official who acknowledged that there were problems
                                            with the adequacy of the inspections. He said GFR needs to re-
                                            emphasize the importance of the inspections to its inspectors and
                                            indicated that GFR was already in the process of implementing a
                                            system to monitor the quality of the inspections.

       00-SF-222-1002                           Page 18
                                                                                      Finding 1




       Auditee Comments     GFR generally disagreed with the finding and stated we had
       and OIG Evaluation   drawn sweeping conclusions from a statistically insignificant
                            sample of properties and not representative of the total inventory
                            of HUD-owned properties in Southern California. GFR stated it
                            was unfair to extrapolate the results of our review of the 30
                            properties to the entire HUD REO program. GFR also
                            disagreed HUD may be less assured that sales of HUD-owned
                            properties provided the maximum return to the mortgage
                            insurance fund since GFR believed it was selling homes faster
                            and at higher prices now than before.

                            We revised the finding to show our conclusion was only
                            reflective of the 30 properties inspected and not to the entire
                            inventory of HUD-owned properties it managed in Southern
                            California. We want to emphasize, however, that we statistically
EXIT                        selected the 30 properties from the two largest cities covered by
                            GFR’s M&M contract to eliminate any bias. The results of our
                            inspection disclosed deficiencies in all 30 properties. Therefore,
                            it is conceivable the deficiencies we found in the 30 properties
                            inspected may also exist on any or all of the properties we did
                            not inspect. We acknowledge GFR has been successful in
                            reducing the inventory of HUD-owned properties in the
                            Southern California area. However, we believe HUD would
                            have greater assurance that sales of HUD-owned properties will
                            provide the maximum return to the mortgage insurance fund if
                            GFR always protected, preserved, and maintained these
                            properties.

                                    Health and Safety Hazards GFR disagreed with our
                                    evaluation and determination of what constitutes health
                                    and safety hazards, and contended the three examples
                                    cited in the finding did not present either health or safety
                                    hazards. GFR stated the split roof beam occurred
                                    before GFR’s M&M contract became effective and the
                                    property was sold without FHA insurance. Therefore,
                                    there was no need to take any corrective action. With
                                    regard to the missing electrical panel box cover, GFR
                                    stated the electricity was not activated and since the
                                    property was listed uninsured, no repairs were required.
                                    As for the charred staircase, GFR stated it was aware of


                                Page 19                                         00-SF-222-1002
       Finding 1


                           this deficiency and acknowledged that additional
                           measures should have been taken.

                           We do not agree with GFR’s explanation. The M&M
                           Contract requires GFR to correct ANY condition that
                           presents a health or safety hazard to the public or to the
                           property within 24 hours of discovery. We based our
                           conclusions on the knowledge and expertise of an OIG
                           inspector who used long established HUD guidelines in
                           determining what constitutes health and safety hazards.
                           Based on that approach, he determined health and safety
                           hazard violations in 25 of the 30 (83%) properties
                           inspected.

                           Defective Paint Surfaces             GFR said the M&M
                           Contract permits GFR to treat defective paint surfaces
                           any time prior to closing. GFR also said it relies on its
EXIT                       initial inspection report and/or the FHA appraisal to
                           identify defective paint requiring treatment.

                           Even though the M&M Contract allows GFR to treat
                           defective paint surfaces any time prior to closing, GFR
                           would never have taken any corrective action on the
                           defective conditions found in the 15 cases reviewed.
                           This is because GFR only initiates work orders for any
                           needed repairs cited by its own inspection reports. For
                           the 15 properties in which we identified defective paint
                           surfaces, GFR’s inspection reports failed to identify any
                           problems. Therefore, GFR did not initiate any work
                           orders to correct the deficiencies.

                           Protection from the Elements GFR disagreed it did
                           not adequately protect the properties from the elements.
                           For the case example cited in the finding, GFR stated it
                           made numerous attempts to tarp the roof to prevent
                           further damage, but the tarp had always been stolen.
                           GFR also stated since the property had already been
                           damaged prior to its conveyance to HUD, subsequent
                           damage was inconsequential.

                           GFR’s contractual obligation is to routinely inspect and
                           take all actions necessary to protect, preserve and
                           maintain HUD-owned properties from further
       00-SF-222-1002   Page 20
                                                          Finding 1


          deterioration in condition or value. In this regard, it is
          incumbent upon GFR to perform the necessary
          inspections required in order to comply with its M&M
          Contract. Further, the condition of a property upon
          conveyance to HUD does not have any bearing on how
          often and well the property should be protected from
          deterioration.

          Routine Vandalism GFR acknowledged vandalism at
          the case example shown in the finding occurred but was
          not repaired. GFR stated the graffiti shown on one of
          the properties used as an example was not removed
          because it was not visible from the street and was not
          vulgar or profane. GFR also claimed the presence of
          graffiti on these properties did not adversely affect
          HUD’s return on the sale of the properties.          GFR
          stated it has now implemented an inspector evaluation
EXIT      system to identify inspectors needing additional training
          or remedial action.

          The M&M Contract clearly requires GFR to repair all
          damages due to vandalism. The contract also does not
          exempt GFR from the removal of graffiti not visible from
          any view. Further, the M&M Contract requires GFR to
          maintain each property in a presentable condition at all
          times.

          Securing the Properties           GFR acknowledged
          difficulties in keeping some properties secured against
          unauthorized entry. GFR claimed it routinely has to
          secure and re-secure the same house several times in the
          neighborhoods we conducted the inspections. Because
          of the high crime rate in those areas, these
          neighborhoods are not typical of the neighborhoods
          where most of HUD’s inventory in Southern California is
          located.

          We recognize some neighborhoods may have higher
          crime rates than others. However, this should not
          preclude GFR from adhering from its contractual
          obligations to ensure all HUD-owned properties are
          always secured against unauthorized entry.


       Page 21                                       00-SF-222-1002
       Finding 1


                                  Debris Removal GFR acknowledged exterior debris
                                  at the properties is a continuing problem but stated it
                                  routinely removes debris as its inspectors report it. In
                                  accordance with the M&M Contract, GFR is required
                                  to remove and properly dispose of all debris both after
                                  property conveyance and on a continual basis.

                                  Maintaining the Lawns              GFR acknowledged
                                  problems with its own outside contractors’ performance
                                  resulting in lawns not being serviced. GFR said it has
                                  now revised its quality control procedures to identify
                                  non-performing contractors to assure lawns are always
                                  maintained. Since GFR stated that it has corrected the
                                  problem, we have no further comment.




EXIT
       Recommendations   We recommend you require GFR to:

                         1A.      Develop and implement written procedures to ensure
                                  inspection methods are consistently applied and in
                                  accordance with its M&M contract.

                         1B.      Provide needed training for its inspectors to ensure
                                  that they are informed and have a complete
                                  understanding of GFR’s         contractual requirements
                                  with respect to property inspections.

                         1C.      Follow-up on GFR’s implementation of its quality
                                  control procedure to ensure that property inspections
                                  reflect the actual condition of the properties and
                                  repairs or corrective action needed are identified and
                                  resolved timely.




       00-SF-222-1002          Page 22
       Finding 2



TOC
        Golden Feather Realty Did Not Always Meet
        Required Time Frames For Processing Sales
                Of HUD-owned Properties
       Golden Feather Realty incurred delays in processing sales of HUD-owned properties in 24 of
       45 HUD-owned properties reviewed. These delays occurred in (1) performing initial
       inspections, (2) obtaining appraisals, (3) approving disposition programs, and (4) re viewing
       sales contracts.

       Consequently, the delays caused the properties to remain in HUD’s real estate owned
       property inventory longer than necessary. As a result of the delays, it could also increase
       property holding costs and exposure to deterioration or damage due to vandalism. Lack of
       knowledge and management emphasis of contract requirements, as well as staff
       misinterpretation of HUD regulations, caused GFR to incur the delays.

EXIT
                                          Section C-2 of the Management and Marketing Services
       GFR is responsible for
                                          Contract between HUD and GFR outlines specific tasks
       marketing HUD-owned
                                          applicable to each assigned property. Further, unless otherwise
       properties timely
                                          specifically stated, GFR’s actions shall be timely so as to
                                          eliminate any hazardous conditions, to preserve and protect
                                          properties, to maintain properties in a presentable condition at
                                          all times, and to enable timely marketing and sales.

                                          We reviewed 30 open and 15 closed case files to determine
       GFR did not always meet
                                          GFR’s compliance with HUD and Management and Marketing
       required time frames for
                                          contract requirements. We found GFR did not always meet the
       processing HUD -owned
                                          required time frames in performing property inspections,
       properties
                                          obtaining appraisals, approving disposition programs, and
                                          reviewing sales contracts.

                                          For the open case files reviewed, delays occurred in 19 of 30
                                          (63%) cases for:

                                          ü performing initial inspections within 24 hours from the date
                                            HUD acquires title to the property (13 cases - 43%);

                                          ü obtaining appraisals within 10 business days from the date
                                            HUD acquires title to the property (4 cases - 13%); and,

                                              Page 23                                       00-SF-222-1002
       Finding 2



                                    ü approving disposition programs within 3 business days after
                                      receipt of appraisal (10 - cases 33%).

                                    For the closed cases, GFR did not review 5 of 15 (33%) sales
                                    contracts within 5 business days, as required.

                                    Details of the four deficiencies are discussed separately below.

       GFR did not always conduct   GFR did not perform initial inspections within 24 hours after
       initial inspections timely   HUD acquired the properties in 13 of 30 (43%) cases
                                    reviewed. The delays ranged from 1 - 18 days late. For 3 of
                                    the 13 cases, GFR did not perform initial inspections for more
                                    than 10 days after the acquisition date.

                                    Timeliness of initial inspections is critical to ensure properties
                                    are fully secured against unauthorized entry and protected from
EXIT                                damages due to vandalism. Documenting the initial condition of
                                    properties at the time they are conveyed to HUD is also
                                    important for GFR’s use in reviewing mortgagees’ claims for
                                    reimbursement of preservation and protection costs.

                                    A GFR official explained the short time frame is difficult to meet
                                    because of the practicality of conducting the initial inspection on
                                    the same day the property is assigned to GFR. This official
                                    added it is even more difficult particularly on a Friday or the day
                                    before a holiday because the next day is a non-working day.
                                    Of the 13 late cases however, only one preceded a weekend,
                                    yet, GFR did not perform the inspection until 4 days later,
                                    including the 2-day weekend period.

       GFR did not always ensure    GFR did not obtain property appraisals within 10 business days
       timely receipt of the        of acquisition in 4 of 30 (%) cases reviewed. The delays
       appraisals                   ranged from 4 - 66 days late. Without the appraisal, the
                                    property can not be listed for sale because the disposition
                                    approach cannot be determined until the appraisal has been
                                    completed and evaluated.

                                    A GFR official explained its Real Estate Asset Management
                                    (REAM) system produces an exception report identifying late
                                    appraisals. GFR’s procedures require its staff to follow-up on
                                    late appraisals. In 2 of the 4 late appraisals, a GFR official
                                    believed the appraisals were received on time because these

       00-SF-222-1002                   Page 24
                                                                                             Finding 2


                                     were completed within 10 business days from the date GFR
                                     entered the properties into its inventory but over 10 business
                                     days from HUD’s actual acquisition date. In accordance with
                                     HUD regulations, appraisals should be completed from the date
                                     HUD acquires title to the property and not the date GFR enters
                                     the property into its inventory.

                                     Delays in obtaining property appraisals cause properties to
                                     remain in HUD’s inventory longer than necessary, thereby,
                                     resulting in additional property holding costs. Properties could
                                     also be exposed to damages due to vandalism while being
                                     unoccupied.

       GFR did not always approve    GFR did not approve property disposition programs within 3
       disposition programs timely   business days of receipt of appraisals in 10 of 30 (33%) cases
                                     reviewed. The delays ranged from 1 - 51 days late. In four of
                                     the 10 cases, GFR approved the property disposition programs
EXIT                                 more than 10 business days late. GFR’s failure to approve
                                     property disposition programs timely resulted in delays in listing
                                     the properties for sale.

                                     The M&M Contract requires GFR to determine the list price
                                     and the manner and terms under which each property will be
                                     offered for sale.     Further, GFR shall make a written
                                     determination of the appropriate disposition approach for each
                                     property.    HUD Handbook 4310.5 REV-2, Property
                                     Disposition Handbook, states that the written property
                                     disposition program shall be completed, reviewed and
                                     approved within 3 days of receipt of the appraisal.

                                     GFR officials stated they were unaware of HUD’s requirement
                                     to approve disposition programs within 3 business days of
                                     receipt of property appraisals. They explained the delays may
                                     have been due to GFR’s policy of approving disposition
                                     programs only once a week. Since GFR lists properties each
                                     Friday, they only approve disposition programs on Thursdays
                                     to minimize any problems or changes that can occur before the
                                     properties are listed for sale. Therefore, if GFR was following
                                     its policy, the most number of days the approvals would have
                                     been delayed was one business day. As we have noted,
                                     however, delays in 4 of the 10 cases took more than 10
                                     business days.


                                         Page 25                                         00-SF-222-1002
       Finding 2


       GFR did not always review   The M&M Contract states GFR shall negotiate, reject, or
       sales contracts timely      accept sales offers; sign sales contracts; and oversee sales
                                   closings. Exhibit 8 of the Contract requires GFR to provide the
                                   closing agent with all necessary pertinent sales documents
                                   including title evidence, tax information, homeowners
                                   association and utility bills, and sales contract within five
                                   business days upon acceptance of a sales contract. GFR must
                                   review closing documentation to ensure their accuracy.

                                   In 5 of 15 (33%) cases, GFR did not review the sales contract
                                   within five business days of receipt of the sales contract. The
                                   delays ranged from 6 - 12 days late. Failure to review sales
                                   contracts in a timely manner delays the entire sales closing
                                   process. GFR officials acknowledged the reviews were late
                                   and claimed the delays were due to the high volume of sales
                                   contracts being processed.

EXIT   Lack of knowledge and       Lack of knowledge and emphasis of contract requirements, as
       emphasis of contract and    well as staff misinterpretation of HUD’s regulations, caused
       HUD requirements caused     GFR to incur delays in processing HUD-owned properties for
       processing delays           sale. A GFR official stated their efforts have been focused on
                                   reducing the size of the REO inventory, rather than always
                                   meeting individual time frames to process each phase of the
                                   disposition process.

       HUD-owned properties        The delays caused HUD-owned properties to remain in REO
       unnecessarily remained in   property inventory longer than necessary. As a result of the
       REO inventory longer        delays, it could also increase property holding costs and
                                   exposure to deterioration and damages due to vandalism. For
                                   example, Finding 1 of this report disclosed over 53 percent of
                                   properties we inspected showed deterioration due to exposure
                                   to the elements and/or damages caused by vandalism. The
                                   longer the properties are left unattended, the more likely that
                                   unauthorized entry and damages due to vandalism could occur.




                                   GFR disagreed with our conclusions and claimed it met relevant
       Auditee Comments            time guidelines except in circumstances beyond its control.
       and OIG Evaluation          GFR asserted the finding contained myopic conclusions drawn
                                   from an infinitesimal sample of data, which does not reflect
                                   GFR’s successes under the M&M Contract. GFR also
                                   disagreed the delays resulted from “lack of knowledge and

       00-SF-222-1002                  Page 26
                                                                Finding 2


       management emphasis on contract requirements” or from “staff
       misinterpretation of HUD regulations”. It added we ignored
       the realities inherent in performing the day-to-day tasks required
       by the M&M Contract. GFR also stated the finding did not
       contain identifiable case data.

       The results of our review do not validate GFR’s claim that it
       met relevant time guidelines except in circumstances beyond its
       control. For the open cases, we statistically and randomly
       selected our sample of 30 cases to avoid having a bias sample.
       Therefore, each case included in the total population where we
       chose our sample had an equal chance of being selected. We
       judgmentally selected 15 closed cases for review. We based
       and reported our conclusions solely on the results of our review
       of the cases and did not project the results in relation with the
       total number of cases GFR processed and closed during the
       audit period. Further, contrary to GFR’s statement, we
EXIT   considered external variables that may have caused delays in
       processing the cases and did not take any exception in those
       cases where we believed the delays were beyond GFR’s
       control. Based on our file reviews and interviews with GFR
       staff and officials, we concluded the delays resulted from lack of
       knowledge and management emphasis on contract
       requirements, or staff misinterpretation of HUD requirements.

               Initial Inspections        According to GFR, it had
               sufficient procedures to ensure initial inspections are
               conducted within 24 hours. GFR did not dispute the
               delays but attributed the delays to issues outside of their
               control such as concerns of HUD’s actual ownership,
               accessibility, right of occupancy, validity of property
               addresses, etc. GFR asserted we did not consider
               these external factors, which impacted GFR’s ability to
               fully comply with its M&M contract.

               We evaluated the reasons GFR cited causing the
               delays, but neither documentation in the files nor
               discussions with GFR staff supported GFR’s assertion.
               None of GFR’s cited reasons applied to the cases we
               reviewed.

               Receipt of Appraisals GFR did not dispute the
               delays but attributed the delays to issues outside of their

           Page 27                                         00-SF-222-1002
       Finding 2


                           control relating to delayed notification of conveyance,
                           property ownership, property accessibility, validity of
                           property addresses, etc. GFR believed appraisals
                           should be completed within 10 business days from the
                           date GFR enters the property into its inventory rather
                           than the same date HUD acquires title.

                           We considered external factors and uncontrollable
                           variables when we reviewed GFR’s appraisal receipt
                           process. The factors and variables GFR cited in their
                           response did not apply to the cases we reviewed.

                           With respect to the criteria on the 10-business day
                           requirement, we discussed this issue with a HUD official
                           during our audit, who verified that appraisals should be
                           completed within 10 business days from the date HUD
                           acquires title to the property, the same day the property
EXIT                       should be entered into GFR’s inventory.

                           Disposition Program Approvals GFR disagreed it
                           did not always approve disposition programs timely.
                           GFR again asserted we failed to consider the
                           environment in which sales disposition operates and the
                           external variables, which interfere with, the smooth
                           transition from appraisal to listing. GFR also claimed
                           we incorrectly relied on a three-day requirement in the
                           HUD Property Disposition Handbook, which predates
                           the existence of the M&M program and ignores the
                           presence of external factors.

                           As cited in GFR’s M&M Contract, however, the HUD
                           Property Disposition Handbook was still effective and
                           GFR was required to comply with handbook
                           requirements, except in specific instances where the
                           contract supercedes the Handbook.

                           Review of Sales Contracts GFR disagreed with our
                           conclusion and stated we did not distinguish between
                           the two separate functions in the review of sales
                           contract process consisting of: (1) contract review and
                           acceptance and (2) preparation and transmission to the
                           closing agent. GFR claimed the 5-day requirement
                           stated in the Contract relates solely to the preparation

       00-SF-222-1002   Page 28
                                                                                  Finding 2


                                  and transmission stage of the process. While GFR did
                                  not dispute there were delays, it cited various situations
                                  outside of its control that cause delays.

                                  We disagree with GFR’s interpretation of the criteria
                                  that the 5-day requirement only relates to the
                                  preparation and transmission of the sales contract. If
                                  this was the case, GFR would never be held
                                  accountable for any delays relating to contract review
                                  and acceptance. Rather, we believe HUD’s intent was
                                  to allow five days for the entire review, acceptance, and
                                  transmittal process to ensure timely sales closings. With
                                  respect to the delays we reported in the finding, we
                                  recognize there may be valid situations causing the
                                  delays, however, none of the reasons cited by GFR
                                  were applicable to the cases reviewed.

EXIT
       Recommendations   We recommend that you:

                         2A.      Instruct GFR to comply with its contract and HUD
                                  requirements to assure sales of HUD-owned properties
                                  are always processed timely.




                               Page 29                                        00-SF-222-1002
       Finding 2




EXIT

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       00-SF-222-1002               Page 30
TOC    Management Controls
       In planning and performing our audit, we obtained an understanding of GFR’s management controls
       applicable to the disposition of HUD-owned properties that were relevant to the audit. Management is
       responsible for establishing effective management controls. Management controls, in the broadest
       sense, include the plan of organization, methods, and procedures adopted by management to ensure that
       its goals are met. Management controls include the processes for planning, organizing, direction and
       controlling program operations. They include the systems for measuring, reporting and monitoring
       program performance.




       Relevant Management Controls          We determined the following management control system were
                                             relevant to our audit objectives:

                                             •   Protecting, preserving, and maintaining HUD-owned
                                                 properties from deterioration or damage due to vandalism.
EXIT                                         •   Identifying and documenting needed repairs to HUD-
                                                 owned properties.

                                             •   Processing HUD-owned properties in accordance with
                                                 established time frames.

                                             We assessed all of the management controls identified above.

       Significant Weaknesses                A significant weakness exists if management control does not
                                             give reasonable assurance control objectives are met. Based
                                             on the results of our review, we believe the following were
                                             significant weaknesses:

                                             •   Lack of written procedures to ensure adverse conditions
                                                 found during property inspections were accurately and
                                                 consistently reported. (Finding 1)

                                             •   Inadequate controls to ensure follow-up action was being
                                                 taken to assure needed repair items identified were resolved
                                                 timely. (Finding 1)

                                             •   Lack of knowledge and management emphasis of contract
                                                 requirements to assure property disposition time frames
                                                 were being met. (Finding 2)


                                                  Page 31                                      00-SF-222-1002
       Management Controls




EXIT


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       00-SF-222-1002                    Page 32
TOC    Follow Up On Prior Audits
       HUD OIG concurrently performed two audits of Golden Feather Realty Services, Inc.’s property
       disposition activities in Irvine, California and Chicago, Illinois’ regional offices. These are the first OIG
       audits of GFR. OIG’s Midwest District will issue a separate audit report of GFR’s property disposition
       activities for the Chicago, Illinois regional office.




EXIT




                                                     Page 33                                         00-SF-222-1002
       Follow Up On Prior Audits




EXIT


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       00-SF-222-1002                      Page 34
                                                                                                Appendix A

TOC                          Results of OIG Site Inspections
                            Health & Safety                    Structural             Physical Appearance
                                                     Not
                                                  Protected   Damage due                            Lawn
             FHA Case      Safety    Defective    from the       to          Not     Exterior     Maintenance
       No.       No.      Hazards     Paint       Elements    Vandalism     Secure   Debris        Needed
       LOS ANGELES:
         1   041-983784     X                                                                         X
         2   041-857782     X            X            X           X                     X
         3   197-033629     X                                                                         X
         4   041-941005     X            X                        X           X         X
         5   041-976229                  X
         6   041-934020     X            X                                    X
         7   041-992458     X            X
         8   197-036026     X            X            X           X                     X
         9   197-065308                                                                 X
        10   197-041029     X            X                        X           X         X             X
        11   041-752988     X            X            X                                               X
        12   041-984016     X                         X           X
EXIT    13   041-837090     X            X                                    X
        14   041-829307     X            X            X                                 X             X
        15   041-963632     X                                     X           X                       X
              Subtotal      13          10            5           6           5         6             6

       SAN BERNARDINO:
        16   048-076413     X            X            X                       X
        17   046-825966     X            X                        X                                   X
        18   046-865353     X                         X
        19   046-875110                                                       X                       X
        20   048-008812                                           X
        21   046-674157     X            X            X           X                                   X
        22   046-394014     X                                                 X
        23   048-028185     X                                                                         X
        24   048-095005     X            X            X           X                                   X
        25   048-154058     X
        26   048-131234     X            X                                                            X
        27   048-084891     X            X            X           X           X
        28   046-969166                               X                                               X
        29   048-078885     X
        30   048-039503     X                                                                         X
              Subtotal      12           6            6           5           4         0              8
                Total       25          16           11          11           9         6             14
              Percent      83%         53%          37%         37%         30%       20%            47%




                                                 Page 35                                    00-SF-222-1002
                                                       Results of OIG Site Inspections




EXIT

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       00-SF-222-1002               Page 36
                                     Appendix B

TOC    Auditee Comments




EXIT




                          Page 37   00-SF-222-1002
       Auditee Comments




   Golden Feather Realty’s
   Response to Audit Findings
   from the Office of Inspector
   General

EXIT
        Response to Finding 1: Golden Feather Realty
        Disagrees with the Finding that it did not
        Adequately Protect, Preserve and Maintain
        HUD Owned Properties




       This document is submitted in response to the draft audit findings of the Office of Inspector General (“OIG”). The contents hereof are
       copyrighted by Golden Feather Realty Services, Inc. (“GFR”) and all rights are reserved. GFR formally requests that this response
       be included as an attachment to the final report of the OIG. This document may be reproduced by the OIG for inclusion in its final report
       provided that it is reproduced in its entirety without modification. Should the OIG’s draft finding be modified, GFR requests an
       opportunity to respond to any amended data, findings or conclusions.


       00-SF-222-1002                                             Page 38
                                                                                                          Auditee Comments



                    Golden Feather Realty Disagrees with the Finding
                    that it Did Not Adequately Protect, Preserve and
                            Maintain HUD Owned Properties

       Since the inception of HUD’s Management and Marketing (“M&M”) program, Golden Feather Realty
       has met and exceeded all material contractual requirements relating to the protection, preservation and
       maintenance of HUD owned properties. Regrettably, the report from the Office of Inspector General
       (“OIG”) has drawn sweeping conclusions from a statistically insignificant sample of properties that are
       not representative of the inventory of HUD owned properties in Southern California. This sampling
       represents less than one percent of the GFR managed inventory of HUD Homes in Southern California
       and was limited to aged inventory in depressed and crime-ridden areas of the region. The
       neighborhoods chosen are not typical of HUD’s inventory in the area (which currently totals under
       5,000 homes – down from over 14,000 homes) and presents a distorted image of HUD owned
       properties in Southern California.
EXIT
       GFR places an unparalleled emphasis on its responsibility to preserve, protect and maintain HUD
       Homes under its management. To that end, GFR constantly monitors and uncovers property issues and
       acts quickly to remedy such issues as they occur. It is this dedication to maintaining and improving
       Southern California’s neighborhoods that has forged strong relationships with local governments and
       citizen groups across the area. In recent months, Golden Feather Realty has received a growing number
       of letters of accolades and thanks from local leaders for dramatically improving the condition of the
       HUD inventory in their areas1. Given the history of troubled HUD property conditions for many years
       prior to the M&M Contract, GFR had to overcome an inherent belief widely held that HUD properties
       were not well kept and not well managed. Prior to the inception of the M&M program, local
       governments had lost patience with property conditions and were issuing citations and liens against
       HUD owned property at alarming rates. In just one year, GFR’s work in cleaning up the properties,
       reducing the inventory and establishing strong bonds in the community reversed the long held anti-HUD
       bias. Now, instead of citations and liens, the lines of communication are open and, when property

       1
           Letters of “Thanks” have come from cities all over the region including, but not limited to:

           §    Kevin Gilligan - Assistant District Attorney, City of Los Angeles
           §    Bob Mischel - Housing Dept. Coordinator/Problem Property Resolution Team, City of Los Angeles
           §    Renne Gardner - Problem Property Resolution Team Bureau Chief, City of Los Angeles
           §    Patrick G. Crowe - Chief of Police, City of Colton
           §    Jason Finley - Code Compliance Officer, City of Palm Desert
           §    James W. Daum - Code Compliance Officer II, City of Moreno Valley
           §    Douglas Wicks - Sanitation Inspector II, Public Works Agency, City of Santa Ana
           §    A. Bryant - Code Enforcement Supervisor, City of Inglewood
           §    David Christenson - Building & Safety Supervisor, County of Riverside
           §    Doug Leeper - Field Operations Supervisor, City Code Compliance, City of San Bernardino
           §    Dale Wierma - Principal Building Inspector, Dept. Of Planning & Building, City of Long Beach

                                                             Page 39                                          00-SF-222-1002
       Auditee Comments


       issues arise, the communities contact GFR, and the problems are resolved. The marked reduction of
       liens and citation across the region is a more representative sampling of the condition of the inventory in
       Southern California, as these cities aggressively monitor their vacant homes closely. If GFR was not
       properly maintaining the HUD inventory, the cities’ code enforcement officers (who inspect these homes
       regularly) would inundate GFR and HUD with citations and liens, interfering with GFR’s ability to sell
       these homes. Years of neglect cannot be completely eliminated overnight, but GFR’s efforts in only one
       year have diametrically changed HUD’s image in Southern California.

       The OIG’s finding contends that:

           1. The property conditions noted in the 30 properties sampled “reflected a negative
              image of HUD’s REO program.”

           2. The property conditions noted in the 30 properties sampled “hampered HUD’s efforts
              to accomplish its mission of strengthening neighborhoods and communities.”

           3. “HUD was also less assured that sales of HUD-owned properties provided the
              maximum return to the mortgage insurance fund.”
EXIT
           4. GFR’s procedures were not adequate to assure that property issues, once “identified,
              were resolved timely and adequately.”

       GFR disagrees with these contentions and the methodology used in reaching them. To
       extrapolate the disputed findings from 30 atypical properties to conclusions that range to the
       entirety of HUD’s REO program is unfair2. In response to the conclusions drawn by the OIG’s
       limited factual finding, GFR notes that:

       The property conditions noted in the 30 properties sampled “reflected a negative image of HUD’s
       REO program.” and The property conditions noted in the 30 properties sampled “hampered HUD’s
       efforts to accomplish its mission of strengthening neighborhoods and communities.”


       2
         The areas sampled by the OIG are not representative of the Southern California inventory in a myriad of respects
       including, but not limited to:
                § Age of Inventory: Of the 30 properties sampled by the OIG, 47% were acquisitions dating back to 1999
                        and 90% (27 properties) dated back six months or more. The age of these properties are not typical
                        of the balance of the inventory and manifests itself in significantly increased property condition
                        issues.
                § Eligibility for FHA Insured Financing: Of the 30 homes sampled, 26 have either closed or are under
                        contract as of the date of this response. Of these 26 homes, 24 (or 92%) were not eligible for FHA
                        Financing because of their condition at the time of acquisition which is not typical of the HUD
                        inventory in Southern California.
                § Average Sales Price: The average price of the single family homes sampled is 18% less than the
                        average price of other HUD Homes in the Southern California area.
                § Number of Units: Of the 30 houses sampled, 37% contained more than one unit. This number is more
                        than twice the inventory average of 17%.

       00-SF-222-1002                                   Page 40
                                                                                      Auditee Comments


       The OIG’s report offers no substantiation for its conclusions that the property conditions
       noted in these 30 houses resulted in either a negative image of HUD’s REO program or
       hampered HUD’s efforts of strengthening communities. To the contrary, as discussed above,
       GFR’s efforts in Southern California have made measurable and identifiable improvements in
       HUD’s image and the image of the REO program. Likewise, the never before seen reduction
       in the inventory of vacant homes (from over 14,000 to under 5,000), has taken abandoned
       buildings out of the community and replaced these blights with new neighbors. Today,
       Southern California neighborhoods are strengthened and buoyed by the knowledge that they
       have 9,000 fewer abandoned buildings (and 9,000 more neighbors) than they had before GFR
       assumed responsibility for the area.

       “HUD was also less assured that sales of HUD-owned properties provided the maximum return to the
       mortgage insurance fund.”

       There is no basis in the OIG report for HUD to feel less assured about the GFR’s ability to
       maximize the return to the mortgage insurance fund. GFR’s management of HUD Homes has
       maximized the return to the fund by preserving, protecting and maintaining the homes, selling
EXIT   the homes faster and at higher prices than realized before. Since the outset of GFR’s
       involvement in Southern California, the return to the mortgage insurance fund has seen
       quantifiable increases of approximately $10,000 per house sold in the region. This equates to
       a return to the fund of over $200,000,000.00 more under GFR’s management. These dramatic
       increases began with GFR’s first full month as the M&M and have continued for each and
       every month thereafter. HUD can be assured that GFR’s management of HUD Homes is
       providing unprecedented returns to the mortgage insurance fund.

       GFR’s procedures were not adequate to assure that property issues, once “identified, were resolved
       timely and adequately.”

       This conclusion focuses on GFR’s procedures for identifying and then resolving property
       issues. As discussed in greater detail below, many examples cited by the OIG as deficient
       property conditions do not, in fact, necessitate remedial measures under the M&M Contract
       (the “Contract”). The Contract sets parameters for what conditions are to be remedied and
       GFR strives in all aspects of its operation to meet these parameters. In addition, the
       subjective evaluation of the OIG field personnel is, in many instances, contrary to GFR’s
       findings which result from many visits and inspections of these houses. Unfortunately, since
       only eight houses were pictured and discussed in detail in the OIG report (six of which have
       already sold and closed in the short time between the OIG inspection and the date of its
       preliminary finding), GFR can only address these subjective findings in two cases. Such a
       small sample represents insufficient data from which to conclude that GFR’s inspection and
       repair procedures are objectionable.




                                                 Page 41                                    00-SF-222-1002
       Auditee Comments




       SPECIFIC PROPERTY CONDITIONS CITED

       Health and Safety Hazards

       The report alleges that health and safety hazards were present in over 80% of the properties inspected.
       GFR disagrees with the OIG’s evaluation and its determination of what constitutes a hazard. In each of
       the three examples discussed in the report, the conditions identified were neither health nor safety
       hazards. We acknowledge the likelihood of differing opinions, as an inspection necessarily reflects a
       subjective view of the condition of a property. In almost every instance, if two people were to examine
       the same house independently of each other, they would be likely to interpret conditions differently and
       would surely identify different issues affecting the value and habitability of the property. This subjectivity
       is inherent in the process.

EXIT   The OIG report offers three photos in support of its conclusions in this area. In photo #1, the OIG
       concludes that a split roof beam in a garage is hazardous. In fact, it appears that the split roof beam was
       a long-standing problem dating back several years (and predates GFR’s management). While it is
       apparent that the beam is in need of repair or replacement (which would not be required or expected
       under the Contract), there is no indication that the other structural members in place do not
       provide more than adequate strength to prevent collapse. While extra-contractual repairs may be
       in order, the OIG report offers no substantiation for the assertion that the condition poses an immediate
       hazard or danger. This property was sold without eligibility for FHA Insurance and closed on May 3,
       2000 (without GFR making a claim that it met minimum property requirements as defined by HUD). It
       is Golden Feather’s belief that no action was required under the terms of the Contract.

       In photo #2, a missing electrical panel box cover is alleged to create a safety or fire hazard. It should
       first be noted that this property was in HUD’s inventory before GFR assumed responsibility for this
       region. The prior property management company, however, did include a photograph in the property
       file which shows the missing panel cover. Having identified this issue, GFR did not attempt to activate
       the electricity. A missing electrical panel or cover can constitute a hazard only if the utilities are
       activated. The absence of the panel cover is one of the reasons the property was analyzed and listed
       “uninsured” and has since sold and closed. Under the Contract, GFR was not responsible for taking
       further action on this house.

       Photo #3 identifies a charred staircase to the rear of a multi-family property and concludes that it is
       “structurally unsafe”. The OIG report further finds that GFR did not identify this issue in an inspection
       report. Initially, it must be noted that GFR did report this deficiency in its initial inspection report. The
       damaged staircase is on the outside of a multi-family property (on the landing where the stairs meet the
       building). In analyzing the condition of the staircase and landing, GFR elected to prevent access to the
       damaged landing from the inside of the building so that an unsuspecting person could not happen upon
       00-SF-222-1002                                 Page 42
                                                                                              Auditee Comments


       the landing without seeing the damaged area. The only remaining access to the landing was from the
       outside of the building. Upon reanalysis, GFR acknowledges that additional measures could have been
       taken to block external access to the landing as well.


       Removal of Defective Paint Surfaces

       The report identifies 19 homes with defective paint and concludes that GFR did not identify or remove
       “harmful paint surfaces”. The report cites one example (Photo 4) of a home with defective exterior
       paint and claims that “GFR inspectors did not identify this problem”. In fact, GFR inspectors did
       identify this problem.

       GFR relies on its initial inspection report and/or the certification of its FHA appraisers to identify
       defective paint requiring treatment. In the house depicted in Photo 4, both GFR’s initial inspection
       report and the appraisal report identified the defective paint. Since defective paint issues accrue over
       long time periods, it would be of little value for GFR’s routine inspectors to reiterate these findings on
       each subsequent report. Accordingly, routine inspection reports do not call out defective paint surfaces.
EXIT
       With regard to the treatment of defective paint surfaces, it should be noted that the Contract permits
       GFR to perform this treatment any time prior to closing. It is common for homes like the one depicted in
       Photo 4 to be treated in the days or weeks immediately before closing. While there may be instances
       where treatment was not performed, GFR continues to refine its procedures to assure that few if any
       homes are sold without proper treatment of defective paint surfaces.


       Protection of Properties from the Elements

       The OIG alleges that in eleven of the properties inspected, GFR did not adequately protect the
       properties from the elements. The one example cited was a tri-plex located in one of the highest crime
       areas in the entire region. On countless occasions, GFR removed interior and exterior debris dumped
       on this property, abated graffiti repeatedly added to the wall, tarped the roof only to have the tarp
       stolen, secured and re-secured the doorway to the property. On this property, thirteen different work
       orders were written in an attempt to protect this asset – all at GFR’s expense. Given the constant acts
       of vandalism, it is unfair to draw a sweeping conclusion about property protection from this one house.
       Because this unit was a victim of extraordinary acts of vandalism, the cost of repeatedly tarping this roof
       (only to have the tarp stolen shortly thereafter) would have been borne by HUD. GFR determined that
       the cost of such repairs would have been substantially greater than the diminution in property value
       resulting from sheetrock damage in the unit. Indeed, since the sheetrock was already damaged prior to
       the property’s conveyance to HUD, subsequent damage would have been inconsequential as the
       sheetrock would require replacement regardless.

       Missing Appliances caused by Routine Vandalism


                                                    Page 43                                         00-SF-222-1002
       Auditee Comments


       The OIG report alleges that “GFR did not repair damage caused by routine vandalism as required.” In
       support, the OIG offers three photographs (Photos 6 – 8).

       In Photo 6, the subject property experienced extraordinary vandalism before becoming part of GFR’s
       inventory. The property was appraised and sold “uninsured” at $15,000.00, 100% of its value. On
       the appraisal that was completed when the property was initially placed in GFR’s inventory, the
       following deficiencies were noted: water damage, drywall/framing damage, roof damage, heater needed,
       electrical problems, plumbing problems, replace doors, substandard add-on, tear-down recommended.
       GFR completed 14 work orders on this house at its expense. GFR acknowledges that its inspectors
       failed to note the graffiti on their reports but this failure, on this house, did not adversely affect HUD’s
       return as the house sold for 100% of its appraised value. Nevertheless, GFR is committed to its
       continuing efforts to improve quality control measures in the field. To that end, GFR has implemented
       an inspector evaluation system which results in monthly “report cards” for each inspector and allows
       management to identify personnel in need of greater training or other remedial action. These report
       cards are prepared by a separate team of Quality Control Inspectors who follow behind GFR field
       personnel to evaluate the quality of their work. In Southern California alone, GFR inspectors complete
       over 10,000 inspections each month. Even with a 99% accuracy rate, there would still be 100 houses
EXIT   each month with potentially unidentified items. It is by no means a perfect science, but GFR’s
       performance across the Southern California area has been laudable and choosing a house that an FHA
       appraiser deems worthy of demolition is not representative of GFR’s work in the area.

       Photo 7 depicts a multi-family motel building in a high crime area. As a result of a Contract modification
       and GFR’s agreement to manage certain multi-family properties for HUD, the abatement of graffiti on
       this building would be at HUD’s costs. This graffiti is not visible from the street and is not vulgar or
       profane. It has been GFR’s experience in these situations that removing the graffiti often provides the
       “taggers” with a fresh palette and encourages more graffiti (often times resulting in instances of profanity
       and vulgarity). In this instance, to minimize the risk of repeated (even daily) acts of graffiti which would
       result in extraordinary cost to HUD, GFR elected to allow this graffiti to remain unabated on this
       building.

       The conclusions drawn from Photo 8 are without support in the property file. This photo depicts a
       bathroom missing a toilet and sink. The OIG concludes that the “sink, vanity and toilet had been missing
       after it was conveyed to HUD” (emphasis added). This conclusion is mistaken as shown by both
       GFR’s Initial Inspection report and the report of the FHA approved appraiser. Both of these reports
       identify the missing items and demonstrate that these fixtures were missing at the time of HUD’s
       acquisition. As this property was listed uninsured, it would not be a candidate for replacement of the
       missing fixtures.


       Securing Properties Against Unauthorized Entry

       The OIG report identifies nine properties that were not fully secured. One example is cited where a
       missing padlock was replaced but was then found to be missing again in a subsequent inspection.

       00-SF-222-1002                                Page 44
                                                                                           Auditee Comments



       As mentioned above, the neighborhoods selected for the OIG sample are not typical of HUD’s
       inventory in Southern California. These are high crime neighborhoods where vacant homes are most apt
       to be broken into by vagrants, gangs and criminals. It is very common in these areas for GFR to secure
       and re-secure the same house many times in the same month at GFR’s expense.

       For example, a review of the first two houses on Appendix “A” to the finding shows the recurring nature
       of security issues in these particular areas. On the first house, between May 5 and June 30, 2000, GFR
       issued work orders to contractors to re-secure the home on four separate occasions. These contractor
       securings are in addition to the multiple instances of minor securing performed by the inspector during
       his routine visits to the property. The second house showed similar results with seven instances of
       contractor securings between April 12 and June 6, 2000. On one of the homes listed in Appendix “A”
       to the OIG finding, GFR issued 18 separate work orders between April and July of this year to address
       issues of security, graffiti, debris removal and safety hazards. The constant battle to keep these
       properties secure and free of extraordinary vandalism is typical of the sampled neighborhoods but not
       representative of HUD’s inventory in Southern California.

EXIT   The OIG report cites one (unidentified) property missing a front door padlock on an upstairs unit.
       Without identification of the specific address where this condition was found, GFR cannot respond to
       the specifics of that circumstance. In the sampled neighborhoods in general, however, it is quite
       common for GFR to replace padlocks several times only to find the locks removed, damaged or stolen
       by the next inspection.


       Maintaining the Physical Appearance of the Properties (Debris Removal)

       In six of the 30 properties sampled, the report alleges the presence of exterior debris around the home.
       One example is cited (Photo 9). In the neighborhoods chosen for this sampling, exterior debris is an
       especially acute issue. As part of its standard operating procedures, GFR performs an initial debris
       removal on each HUD Home as it comes into inventory. Thereafter, as debris is reported by
       inspectors, work orders are issued for “subsequent debris removals”. Across the entire Southern
       California region, GFR performs subsequent debris removals on approximately 15% of the inventory.
       In stark contrast, the areas sampled by the OIG have a subsequent debris removal rate of nearly 100%.
       GFR reviewed each of the six instances of debris cited by the OIG report and at least one subsequent
       debris removal work order had already been issued on each of these houses as of the date of this
       response.

       Of the six properties for which debris issues were found, only one is an unsold property. That house
       was illegally occupied in June. As that property is currently the subject of an eviction proceeding, GFR
       is careful to avoid approaching the property in violation of the rights of the adverse occupants. GFR
       had removed debris dumped on this site on several occasions prior to the adverse occupancy, and it
       appeared that the house was being used as a dumping grounds by its neighbors. Once vacant, this
       property will again be cleaned and prepared for sale. It should also be noted that GFR is working

                                                   Page 45                                       00-SF-222-1002
       Auditee Comments


       closely with the investigative branch of the OIG to solve the ongoing and significant problems created
       for HUD by rental scams such as the one affecting this property.

       As required by the Contract, GFR endeavors to timely inspect these homes and issue work orders to
       remove the debris as it is discovered. The problem with these six properties (and in these particular
       neighborhoods in general) is that as soon as work orders are issued and debris hauled away, others
       come along and illegally dump on the property. It is an ongoing battle that GFR is fighting and winning
       (especially when compared to its predecessors). The growing list of laudatory accolades from the cities
       underscores GFR’s successes in cleaning up this inventory.


       Maintaining Lawns Consistent with Neighborhood Standards

       During the growing season, GFR performs lawn maintenance twice monthly on each property in
       inventory. At current inventory levels, this amounts to over 10,000 yard services every month. The
       OIG report cited 14 lawns of the 30 sampled houses which were described as not properly maintained.

EXIT   As the 2000 growing season began in earnest, GFR encountered some difficulties with certain
       contractors that ultimately were terminated. GFR acknowledges that these issues of contractor non-
       performance resulted in some homes missing scheduled yard services and others having only the front
       yard cut during a given time period. GFR’s internal quality control procedures identified these issues
       prior to the OIG’s report and initiated the process of terminating and replacing the offending
       contractors. In addition, GFR has refined its quality control procedures to maximize its ability to identify
       contractors that fail to perform as promised. Since June, 2000, with the implementation of increased
       quality control in the field, GFR’s QC Inspectors are not only reviewing the work of GFR’s personnel,
       they are also reviewing the work of the contractors, especially yard service companies. These
       heightened quality control measures will improve GFR’s ability to identify poor performing contractors
       and allow GFR to take corrective action even sooner.

       Despite all of these internal measures, however, with 10,000 yard cuts every month, there will be
       occasional instances of human errors which GFR is committed to identifying and remedying.


       CONCLUSION

       The OIG finding concludes by restating the four contentions discussed hereinabove and by restating its
       conclusions that GFR did not adequately inspect or report deficiencies or ensure that such deficiencies
       were corrected. These generalizations are drawn from a non-representative sampling of HUD’s
       inventory in the area and in some cases, as shown above, are based on incorrect factual findings. To
       criticize GFR’s property maintenance procedures based on this sample creates an unfair perception of
       GFR’s efforts in this region and ignores its unparalleled successes.



       00-SF-222-1002                                Page 46
                                                                                           Auditee Comments


       Even before this report, as part of its ordinary business practices, GFR was constantly at work refining
       and improving its procedures for property maintenance and quality control. This commitment to always
       strive to be better will continue for the life of this Contract and all that follow. Since GFR assumed
       responsibility as the M&M for Southern California, nearly 23,000 HUD homes have sold and the
       inventory of vacant HUD Homes has fallen from over 14,000 down to its current level of under 5,000.
       GFR has produced an unprecedented twelve consecutive months of inventory reduction in Southern
       California. In just over one year, GFR has processed 16,984 newly acquired properties into inventory
       and has listed 22,944 homes for sale, of which 8,080 were offered to non-profits, police officers, and
       teachers. As a direct result of GFR’s improvement of property conditions in the region, HUD has
       enjoyed a marked increase in the average sales price of its homes and an equally measurable decline in
       the time on market (resulting in dramatically lower holding costs for HUD). None of these dramatic
       improvements in the disposition of HUD’s inventory would have been possible had GFR failed to
       properly maintain, preserve and protect the assets under its management.

       While GFR is very proud of its performance to date, it recognizes that the nature of its business will
       always present challenges requiring constant monitoring and change. GFR remains steadfastly
       committed to meeting these challenges and producing results which foster HUD’s mission of
EXIT   strengthening neighborhoods and communities.




                                                   Page 47                                       00-SF-222-1002
       Auditee Comments




EXIT




       00-SF-222-1002     Page 48
                                                                                                                         Auditee Comments




   Golden Feather Realty’s
   Response to Audit Findings
   from the Office of Inspector
   General

        Response to Finding 2: Golden Feather Realty’s
EXIT    Systems and Procedures Help Assure that
        Relevant Property Disposition Time Guidelines
        are Met, Except in Circumstances Beyond the
        Company’s Control.




       This document is submitted in response to the draft audit findings of the Office of Inspector General (“OIG”). The contents
       hereof are copyrighted by Golden Feather Realty Services, Inc. (“GFR”) and all rights are reserved. GFR formally
       requests that this response be included as an attachment to the final report of the OIG. This document may be reproduced
       by the OIG for inclusion in its final report provided that it is reproduced in its entirety without modification. Should the OIG’s
       draft finding be modified, GFR requests an opportunity to respond to any amended data, findings or conclusions.

                                                                   Page 49                                                       00-SF-222-1002
       Auditee Comments




            Golden Feather Realty’s Systems and Procedures Help
           Assure that Relevant Property Disposition Time Guidelines
           are Met, Except in Circumstances Beyond the Company’s
                                    Control.


       INTRODUCTION

       In evaluating the success of an M&M Contractor’s property disposition process, one must look across
       its entire inventory and examine the timeliness and success of its sales programs. Selecting 45
       properties from a sales program that has processed over 25,000 houses (a sample size of less than
       .02%) does not allow this audit to reflect the real successes seen in Southern California during the first
EXIT   year of the M&M Contract.

       Since assuming responsibility for Southern California, GFR has substantially improved the average net
       proceeds received by HUD on each sale, which has resulted in an unprecedented increase in the return
       to the FHA mortgage insurance fund. These tangible benefits result from GFR's efficiencies and the
       company’s attention and typical adherence to the timelines set forth in the M&M Contract (the
       “Contract”). To achieve these fiscal improvements during the first year of the Contract, GFR and its
       staff focused on reducing average time on market for a HUD Home together with increasing the net
       return on each sale. When both of these objectives are met, the results are palpable. For the twelve
       month period immediately preceding GFR's management of the HUD-owned inventory, a HUD Home
       averaged 234 days in inventory. Since the inception of the M & M program, this time frame has
       dropped dramatically to 166 days 3. As the OIG report states, added time in inventory can “increase
       property holding costs and exposure to deterioration or damage due to vandalism.” With the average
       home in inventory 68 fewer days under GFR’s management, HUD Homes have had less time to suffer
       from deferred maintenance or vandalism directly resulting in holding cost savings to HUD. Fewer days
       in inventory, coupled with better property conditions, have also resulted in increased return to HUD on
       the sale of the inventory. Reviewing .02% of the homes sold overlooks these critical facts and does not
       provide an appropriate overview of the program’s success to date.

       In addition to its myopic conclusions drawn from an infinitesimal sample of data, the OIG Report is also
       devoid of any specific or identifiable case data, making it is impossible to comment discretely on the
       origin of the individual findings. To suggest that disposition delays resulted from a “lack of knowledge

       3
        This figure is based on properties acquired by HUD since the inception of the M&M Contract in Southern
       California.

       00-SF-222-1002                               Page 50
                                                                                                    Auditee Comments


       and management emphasis on contract requirements” or from “staff misinterpretation of HUD
       regulations,” ignores the realities inherent in performing the day-to-day tasks required by the Contract. It
       is GFR's position that the isolated findings and conclusions drawn there from are out of context and
       demonstrate a disregard for the external forces affecting the practical application of the M & M
       contract. The process of managing and marketing HUD-owned properties does not exist in a vacuum
       and is impacted by a variety of uncontrollable variables and situations, many of which will be identified in
       this response.

       As a result of GFR’s efforts in only one year, HUD’s property disposition program in Southern
       California is better today than ever before.


       TIMELY PERFORMANCE OF INITIAL INSPECTIONS

       GFR’s procedures provide for the performance of an initial inspection of properties within 24 hours of
       assignment. In some cases, however, unforeseen issues may delay the inspection as matters such as
       ownership, right of occupancy or proper addresses are resolved.
EXIT
       §   Of the 30 to 70 new acquisitions processed by GFR daily in Southern California, approximately
           40% are delivered to GFR with inaccurate or insufficient addresses requiring additional research to
           correctly identify. The initial processing of these assets, which come to GFR through various means,
           but primarily through electronic conveyance, often require time consuming investigation resulting
           from either the mortgagees’ failures to properly complete their claim or inherent flaws in the
           SFIS/SAMS interface4. GFR, at its expense, has been compelled to purchase investigative
           resources to correct these errors before an initial inspection can be ordered. If GFR were to act in
           blind adherence in these cases, HUD would be flooded with lawsuits resulting from trespass claims
           by innocent homeowners whose houses were opened and, in some cases, even cleaned out. Even
           worse, is the looming possibility of a physical confrontation between a GFR Inspector and a home
           owner if the wrong address were to be assigned without verification. Under the best of
           circumstances, GFR cannot investigate every questionable issue and get the inspection order to the
           field in the first few hours following assignment. Being thorough, however, even if it occasionally
           results in delays, is necessary to avoid serious mishaps that could tarnish HUD’s image in the
           community. There can be little doubt that the Contract did not foresee that the system of electronic
           conveyance would have as many systems-related errors as it does. Nevertheless, GFR works as
           quickly as possible to correct these errors and endeavors to complete initial inspections within 24
           hours of verifying the address in each case. An initial inspection cannot be completed in 24
           hours if a correct address is not provided by the electronic conveyance system.




       4
        In many instances, the space available in a SAMS or SFIS field will be insufficient to allow the entry of complete
       addresses including unit numbers. In some cases, the information is truncated leaving GFR with an incomplete
       address.

                                                        Page 51                                            00-SF-222-1002
       Auditee Comments


       •   In addition to incorrect addresses, GFR must also resolve questions of legal ownership. On a
           regular basis, errors are discovered in the claims filed through the SFIS system which call into
           question whether a property is owned by HUD. Without full knowledge of HUD’s actual
           ownership, GFR cannot proceed. There are occasions where an incorrect case number is entered
           into the SAMS/SFIS system triggering the wrong property to be identified as an acquisition. In the
           past, claims were checked before hitting Z-track. Now properties hit Z-track as soon as a claim is
           made by the mortgagee; regardless of their correctness. Other claims reflect erroneous claim type
           codes that raise doubt as to their validity. An initial inspection cannot be completed in 24
           hours if there are concerns over HUD’s actual ownership of the property.

       •   When a new acquisition involves a condo association and gated security, obtaining legal access can
           present numerous hurdles which result in unexpected, but unavoidable, delays. Once the
           management company is identified, more often than not, association fees must be paid before
           access will be granted. As these payments cannot be processed instantly considering the many
           factors involved, the inspection is delayed. An initial inspection cannot be completed in 24
           hours if legal access is not available.

       •   If one carefully examines the dates and times of claims being placed in the SFIS system, you can
EXIT       easily detect discrepancies making it impossible to achieve the 24 hour guideline. For example,
           claim dates or HUD acquisition dates may commence on one day, but not appear in SAMS until the
           next day. Obviously, in such cases, GFR cannot inspect what it does not have. An initial
           inspection cannot be completed in 24 hours if the date of acquisition and the date GFR
           receives notification of conveyance are not the same day.

       •   On occasion, properties presented to GFR on the electronic conveyance do not exist in SFIS due
           to the original mortgage predating the system. When this happens, the property can be entered in
           SAMS, but GFR must verify HUD’s ownership prior to performing an initial inspection. This error,
           called by SAMS an IIF Verification error, can only be corrected by HUD. Often this fix takes
           considerable time. An initial inspection cannot be completed in 24 hours if the asset
           cannot even be entered into SAMS correctly.

       •   In the case of high-risk neighborhoods, our inspectors encounter a variety of dangerous conditions
           that require great caution. For the sake of their safety and the safety of others in the community,
           inspectors are sometimes forced to solicit the assistance of the police or partner with another
           inspector. An initial inspection cannot be completed in 24 hours if the conditions threaten
           the safety of the inspector or others in the community.

       •   In many situations, GFR discovers HUD-owned properties occupied when they are first
           approached. Such situations may be the result of rental scams, squatters, adverse occupants, or the
           mortgagee’s failure to complete the required evictions. In many of these cases, access to property
           is unavailable until legal action can be completed. An initial inspection cannot be completed in
           24 hours if unauthorized occupancy is discovered.



       00-SF-222-1002                              Page 52
                                                                                                 Auditee Comments


       •   On some occasions, the physical addresses of assigned properties are altered to confuse foreclosing
           entities. We have encountered exchanged unit numbers and corner houses renumbered deceptively
           to disguise the property as having a municipal address on the adjacent street. The tricks are
           endless. An initial inspection cannot be completed in 24 hours if the very identity of the
           property is altered to deceive.

       •   As if there are not enough natural obstacles, GFR has even encountered second story units where
           stairways had been removed eliminating any chance to access the property timely. An initial
           inspection cannot be completed in 24 hours if all means of access have been removed.



       TIMELY RECEIPT OF APPRAISALS

       The finding that "GFR did not always ensure timely receipt of the appraisal" is equally troublesome in
       light of the contributing causes which may delay the anticipated delivery of appraisals. As with the first
       issue, there are a multitude of factors that may surface, including the following, which lead to unfavorable
EXIT   timing in this category. In addition, the OIG Report’s reliance on “HUD regulations”, while contractual,
       often presents issues of impracticality, as these regulations were not drafted in conjunction with the
       M&M Contract.

       The OIG Report contends that, according to HUD regulations, appraisals should be completed within
       ten business days “from the date HUD acquires title to the property and not the date GFR enters the
       property into its inventory.” This approach, however, ignores the realities of property conveyance
       under the M&M program. GFR usually has no means of knowing when a property will come into its
       inventory other than the receipt of the electronic conveyance. Accordingly, until GFR receives the
       conveyance and enters it into the system, it cannot order its appraisal. It must be remembered that the
       “regulations” to which the OIG Report refers were drafted prior to the existence of the M&M program
       and do not reflect the requirements or realities of the Contract. It should also be noted that the Contract
       itself does not call for appraisals to be completed within ten days of HUD’s acquisition of the property.
       To the contrary, the Contract requires that appraisals be obtained within ten business days of
       “assignment” of the property (M&M Contract, Section C-2, IV)5.

       •   Much like the circumstances hampering the timely inspection of properties, appraisers are also
           challenged by incorrect or incomplete addresses. GFR attempts to issue appraisal instructions only
           after the correct information is obtained. Unless the property can be properly identified,
           appraisals cannot be completed in 10 days.



       5
         There is an internal contradiction within the M&M Contract that makes the commencement date for the appraisal
       timeframe unclear (see M&M Contract, Section C-2, V, Para. 9). Since it would be impossible to achieve contract
       compliance with the ten day period commencing with HUD acquisition, GFR bases its timeframe calculation on the
       assignment date as provided by the Contract.

                                                      Page 53                                          00-SF-222-1002
       Auditee Comments


       •   As discussed in the context of initial inspections, gaining access to condos in gated communities also
           creates delays. Unless access can be legally obtained, appraisals cannot be completed in 10
           days.

       •   Questionable title to properties deem premature appraisal attempts ill-advised. Unless ownership
           can be confirmed, appraisals cannot be completed in 10 days.

       •   If a site is discovered to be zoned commercial, a whole new set of instructions, licenses, criteria, and
           forms are required. Due to the specialty nature of this change and the appraisal itself, it takes more
           than the customary 10 days. The added factor of an atypical zoning prevents appraisals from
           being completed in 10 days.

       •   If a property is occupied by adverse inhabitants, the appraiser is unable to enter. Appraisers have
           been denied access to properties by unexpected residents varying from dangerous animals to gang
           members. In these cases, legal action is often required which necessarily delays the appraisal. The
           presence of adverse occupants prevents appraisals from being completed in 10 days.

       •   Health issues also surface causing delays in the completion of appraisals. Methamphetamine labs,
EXIT       excessive blood, drug paraphernalia, for example, require specialized removal and delay property
           inspection by the appraiser. The presence of unexpected materials prevents appraisals from
           being completed in 10 days.

       •   In areas of rampant vandalism, locks may be tampered with denying the appraiser access between
           the time of the initial inspection and the next day when he arrives. Unexpected denial of access
           prevents appraisals from being completed in 10 days.

       •   Deceptive tampering with addresses and/or unit numbers also interferes with the appraiser’s ability
           to obtain access to the correct unit. In cases of altered street or unit numbers, appraisals
           cannot be completed in 10 days.

       •   There are also miscellaneous circumstances such as missing stairways, encroachments requiring
           surveys, or properties appearing to have two houses on one lot or two lots with one house in the
           middle. In these cases, further research is required to assure that the appraiser is analyzing the
           correct property and is able to inspect the entire building. In cases requiring additional
           research, appraisals cannot be completed in 10 days.



       TIMELY APPROVAL OF DISPOSITION PROGRAMS

       The OIG Report contends that "GFR did not always approve disposition programs timely". This finding
       also fails to consider the environment in which the sales disposition program operates and the external
       variables which interfere with the smooth transition from appraisal to listing.


       00-SF-222-1002                                Page 54
                                                                                              Auditee Comments


       •   The OIG Report, relying by reference on the HUD Property Disposition Handbook, is critical of
           GFR’s property disposition program in those cases where a disposition has not been approved
           within three days of receipt of appraisal. This criticism, however, is based on requirements that
           significantly predate the existence of the M&M program and once again ignores the presence of
           external factors. A number of the guidelines in the Disposition Handbook are simply no longer
           feasible or workable under the M&M program. For example, the Property Disposition Handbook
           does not even allow for, or provide guidelines for, an electronic bidding system. With regard to
           three day approvals of all dispositions, the handbook directive was not drafted in light of the current
           method of electronic bidding. As an example, recent changes in the SAMS program automatically
           converts properties to a Step 6 on the listing date (instead of on the approval date). To sporadically
           approve disposition programs that cannot be moved to a Step 6 risks listing properties that may
           otherwise be cancelled for any of the following reasons.

               •   Title issues discovered at the last minute
               •   Quality Control of physical condition of property discovers an unsafe condition
               •   Discovery of adverse occupants
               •   Removal of the property from the market to accommodate the OIG Safe Home Program
               •   Dramatic change in condition due to extraordinary vandalism requiring reevaluation of the
EXIT               price or status
               •   Fire
               •   Demolition due to outstanding code violations pre-dating GFR
               •   Notification from mortgagees that the conveyance was improperly done and must be re-
                   conveyed

       Remedying these items would be made far more complicated if GFR were approved dispositions before
       the property was actually ready to list. Additionally, since timelines are the focus of this and many other
       monitoring efforts, early approval of dispositions would stretch the time in Step six (Step 5 for approved
       non-profit sales) causing more exceptions on the SAMS “Cases Exceeding Time in Current Step
       Report”. Early disposition approvals could also cause early reanalyzation of listings and a premature
       reduction in price, which ultimately can reduce the return to the FHA fund.


       TIMELY REVIEW OF SALES CONTRACTS

       The OIG Report contends that “GFR did not always review sales contracts timely.” In support of this
       finding, the report refers to Exhibit 8 of the Contract which requires that M&M Contractor to provide
       closing agents with certain documents within five (5) days of contract acceptance.

       The OIG Report fails to distinguish between two separate and distinct functions in the contracting
       process. This process involves two stages: (1) the contract review and acceptance process (“Stage 1”);
       and (2) the preparation and transmission of the contract to the closing agent (“Stage 2”). While the
       OIG Report cites a five day time frame for Stage 2, the criticism of GFR in this finding relates to failing
       to complete the Stage 1 review within five (5) days.

                                                    Page 55                                         00-SF-222-1002
       Auditee Comments



       What is missed in the OIG Report is that there is no five (5) day requirement in the M&M Contract for
       Stage 1. GFR imposes internal guidelines to expedite the process, but the “5 of 15 cases” cited by the
       OIG relate to contract review for which there are no express time requirements under the Contract.
       The OIG Report further confuses this issue by saying that “GFR did not review the sales contract within
       five business days of receipt of the accepted sales contract” (emphasis added). GFR does not receive
       an “accepted sales contract.” Until GFR signs the contract, there is no “accepted sales contract”.

       GFR reviews and accepts contracts as expeditiously as possible given the issues that arise during the
       process. Of course, because of the legal significance of accepting a contract on behalf of HUD, GFR
       must be thorough in its contract review to assure accuracy and completeness. In many instances,
       contract review will discover errors requiring additional documentation or the completion and re-
       execution of a new contract by the buyer and agent. These delays are beyond GFR’s control:

           •   The percentage of contracts received by GFR with errors is in excess of 50%. The M&M
               contract requires GFR to give brokers the opportunity to remedy errors in their contract.
               Considering the required communication and the time needed for the broker to revise the
EXIT           documents (and obtain new signatures), delays will almost always exist in these cases.

           •   Tower Communications (www.HUD.org) occasionally experiences technical difficulties,
               sometimes from the Internet, and the results of the online bidding must be carefully examined to
               avoid awarding the properties incorrectly. These technical issues can result in a delay in
               contract review.

           •   HUD frequently adds new programs and changes existing programs and procedures causing
               revisions to contract procedures. Educating the real estate community and the public takes
               time. These new programs and procedures will often result in significantly increased numbers of
               contract errors as the public learns of the new procedures.

           •   GFR grants unrepresented OND/TND purchasers more time than those represented by
               brokers. This is in keeping with HUD’s mission to help strengthen neighborhoods. These
               unrepresented buyers are often less sophisticated and require more assistance.

           •   GFR attempted a zero tolerance policy relating to contract compliance and contract errors in an
               attempt to reduce the review timeframe but was met with vocal protests, congressional
               complaints, threats, and lawsuits. At HUD’s advice, GFR abandoned the program and
               returned to a more lenient and forgiving approach. Working with the real estate community and
               public to resolve these errors takes time and causes delays in contract acceptance.

           •   The M & M contract requires that we accept back-up bidders. When the initially awarded
               winner fails to perform, we then notify the back-up and the process starts all over. In these
               cases, the bid date and the contract date may be several days or weeks apart. GFR updates
               the award date in SAMS, but a review of bid date versus contract date would make the
               contracts appear delayed when, in fact, they were not.

       00-SF-222-1002                              Page 56
                                                                                                    Auditee Comments


           •   When it is discovered that there may be a title problem, GFR tries to catch it early enough and
               will not sign an incoming contract until the title issue is resolved. The resulting research can
               cause delays in contract acceptance.


       OIG’S SUMMARY CONCLUSIONS

       The OIG Finding makes two conclusions: (1) that the GFR staff is hindered by a "lack of knowledge"
       causing "process delays"; and (2) “delays caused HUD-owned properties to remain in REO property
       inventory longer than necessary.” GFR disagrees with these conclusions and contends that the results
       over the preceding year presents a more accurate depiction of the process than does 45 unidentified
       sales.

       The OIG claim that the GFR staff is hindered by a "lack of knowledge" causing "process delays" is
       unfounded. The very basis of GFR's success in inventory reduction is the careful monitoring and
       administration of the allowable timetables and constraints. Indeed, these timeframes are an integral part
       of GFR's overall philosophy of managing the M&M contract. The OIG Report’s statement that a GFR
EXIT   official said that greater emphasis is placed on the reduction of inventory, to the exclusion of individual
       timeframes was taken entirely out of context. These two objectives (reducing inventory and meeting
       individual timeframes) are not mutually exclusive and GFR is focused on meeting both. The emphasis on
       individual timeframes is strongly evidenced by the countless exception reports that are run daily and the
       many procedures and controls demonstrated to the OIG staff throughout their audit. In addition, each
       week, every GFR processing office prepares a report that details the percentage of properties meeting
       timeline requirements through each step of the disposition process. This Weekly Matrix Report is sent
       to senior management and is reviewed to identify areas where delays are occurring. In these situations,
       management does further investigation to isolate the cause of the delay and to determine appropriate
       remedial action. These delays, however, cannot be attributed to a lack of knowledge of the staff. To
       the contrary, delays will always be inherent in the process and will unavoidably result from external
       factors beyond GFR’s control.

       The OIG Report’s second conclusion, that properties remained in inventory longer than necessary, is
       not supported by the factual results seen over the preceding year. As discussed above, since GFR took
       over management of these properties, the time in inventory has gone down by an average of 68 days
       per home6. Properties are being held in inventory for less time and this is a result of GFR’s adherence,
       where possible, to the time frames in the M&M Contract. The findings of a review of less than .02% of
       the GFR’s sales, and findings which fails to identify the specific sales so that the causes of the delays can
       be determined, does not dispute the fact that time in inventory has declined significantly under GFR’s
       management.



       6
        It should also be noted that the decline in average time in inventory would have been much greater except that GFR
       was required to hold over 500 houses off market for an extended period of time as an Asset Control Area agreement
       was negotiated between HUD and the city and county of San Bernardino.

                                                        Page 57                                            00-SF-222-1002
       Auditee Comments


       CONCLUSION

       During GFR’s first year in Southern California, approximately 25,000 appraisals were ordered, the
       majority of which were delivered within the allotted time. Nearly 18,000 new acquisitions were
       processed and inspected, most without incident or delay. Approximately 24,000 properties have been
       listed for sale, having completed the appropriate preparations and data entry. Inventory reduction has
       been unprecedented dropping a swollen inventory of nearly 14,000 to a now manageable level under
       5,000.

       These statistics along with the substantial increase in sale price, reduction in holding cost, and the
       increased net return to the FHA fund fully supports GFR's claim of success and overall conformity to
       the intended time frames. If GFR had failed to comply with the timeframes in any material way, the
       results would surely have manifested themselves in numbers contrary to those herein presented.




EXIT




       00-SF-222-1002                             Page 58
                                                                                                  Appendix C

TOC    Distribution
       Secretary’s Representative, California State Office, 9AS (2)
       Senior Community Builder, Los Angeles Office, 9HS
       Director, Santa Ana Homeownership Center, 9JHH (2)
       Primary Field Audit Liaison Officer, 6AF (2)
       General Deputy Assistant Secretary for Housing, H (Rm. 9100)
       Associate General Deputy Assistant Secretary for Housing, H (Rm.9106)
       Deputy Assistant Secretary for Single Family Housing, HU (Rm. 9282)
       Special Assistant (Single Family Audits), Kathleen Malone, HU (Rm. 9278)
       Secretary, S (Rm. 10000)
       Deputy Secretary, SD (Rm. 10100)
       Acting, Chief of Staff, S (Rm. 10000)
       Office of Administration, AA (Rm. 10110)
       Assistant Secretary for Congressional & Intergovernmental Relations, J (Rm. 10120)
       Office of Public Affairs, W (Rm. 10132)
       Deputy Assistant Secretary for Administrative Services, Office of the Executive Secretariat, AX
               (Rm. 10139)
EXIT   Deputy Assistant Secretary for Intergovernmental Relations, JI (Rm. 10234)
       Deputy Chief of Staff, S (Rm. 10222)
       Deputy Chief of Staff for Policy, S (Rm. 10226)
       Deputy Chief of Staff for Programs, S (Rm. 10226)
       Special Counsel to the Secretary, S (Rm. 10226)
       Senior Advisor to the Secretary, S (Rm. 10222)
       Special Assistant for Inter-Faith Community Outreach, S (Rm. 10222)
       Executive Officer for Administrative Operations and Management, S (Rm. 10220)
       General Counsel, C (Rm. 10214)
       Assistant Secretary for Housing/Federal Housing Commissioner, H (Rm. 9100)
       Assistant Secretary for Policy Development and Research, R (Rm. 8100)
       Assistant Secretary for Community Planning and Development, D (Rm. 7100)
       Assistant Deputy Secretary for Field Policy and Management, SDF (Rm. 7106) (2)
       Office of Government National Mortgage Association, T (Rm. 6100)
       Assistant Secretary for Fair Housing and Equal Opportunity, E (Rm. 5100)
       Director, Office of Departmental Equal Employment Opportunity, U (Rm. 5130)
       Chief Procurement Officer, N (Rm. 5280)
       Assistant Secretary for Public and Indian Housing, P (Rm. 4100)
       Director, Office of Departmental Operations and Coordination, I (Rm. 2124)
       Office of the Chief Financial Officer, F (Rm. 2202)
       Chief Information Officer, Q (Rm. P8206)
       Director, Enforcement Center, V, 200 Portals Building
       Acting Director, Real Estate Assessment Center, X, 1280 Maryland Avenue, SW, Suite 800
       Director, Office of Multifamily Assistance Restructuring, Y, 4000 Portals Building
       Deputy Chief Financial Officer for Finance, FF (Rm. 2202)

                                                   Page 59                                       00-SF-222-1002
       Appendix C


       Director, Office of Budget, FO (Rm. 3270)
       Headquarters Audit Liaison Officer, Helen M. Stackhouse, HQC (Rm. 6232) (2)
       Departmental Audit Liaison Officer, FM (Rm. 2206) (2)
       Acquisitions Librarian, Library, AS (Rm. 8141)
       Armando Falcon, Director, Office of Federal Housing Enterprise Oversight, 1700 G Street, NW,
               Room 4011, Washington, DC 20552
       Frank Edrington, Deputy Staff Director, Counsel, Subcommittee on Criminal Justice, Drug Policy &
               Human Resources, B 373 Rayburn House Office Bldg., Washington, DC 20515
       Cindy Fogleman, Subcommittee on Oversight and Investigations, Room 212, O’Neil House Office
               Bldg., Washington, DC 20515
       Judy England-Joseph, Director, Housing and Community Development Issue Area, U.S. GAO, 441 G
               Street, NW, Room 2474, Washington, DC 20548
       Steve Redburn, Chief Housing Branch, Office of Management and Budget, 725 17th Street, NW,
               Room 9226, New Executive Office Bldg., Washington, DC 20503
       Michael Flachta, Assistant Inspector General for Audits, Department of Veteran Affairs, Office of
               Inspector General (52A), 810 Vermont Avenue, NW, Washington, DC 20410
       The Honorable Fred Thompson, Chairman, Committee on Governmental Affairs, 340 Dirksen Senate
EXIT           Office Bldg., United States Senate, Washington, DC 20510
       The Honorable Joseph Lieberman, Ranking Member, Committee on Government Affairs, 706 Hart
               Senate Office Bldg., United States Senate, Washington, DC 20510
       The Honorable Dan Burton, Chairman, Committee on Government Reform, 2185 Rayburn Bldg.,
               House of Representatives, Washington, DC 20515
       The Honorable Henry A. Waxman, Ranking Member, Committee on Government Reform, 2204
               Rayburn Bldg., House of Representatives, Washington, DC, 20515
       President, Golden Feather Realty Services, Inc., 13409 N.W. Military Hwy., Suite 210, San
               Antonio, TX 78231 (2)




       00-SF-222-1002                            Page 60