oversight

The Data in CAIVRS Did Not Agree with the Data in FHA's Default and Claims System

Published by the Department of Housing and Urban Development, Office of Inspector General on 2014-07-02.

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

OFFICE OF AUDIT                                      DRAFT
REGION   7
   For Discussion and Comment Only - Subject to Review and Revision
KANSAS CITY, KS




            U.S Department of Housing and Urban
         Development, Office of Single Family Housing

       Review of FHA Default and Claims Information
        in Credit Alert Verification Reporting System
                          (CAIVRS)




2014-KC-0002                                                          July 2, 2014
                                                                    Issue Date: July 2, 2014

                                                                    Audit Report Number: 2014-KC-0002




TO:            Kathleen Zadareky, Deputy Assistant Secretary for Single Family Housing, HU

               //signed//
FROM:          Ronald J. Hosking, Regional Inspector General for Audit, 7AGA

SUBJECT:       The Data in CAIVRS Did Not Agree With the Data in FHA’s Default and Claims
               Systems


    Attached is the U.S. Department of Housing and Urban Development (HUD), Office of
Inspector General’s (OIG) final results of our review of the default and claims information in
HUD’s Credit Alert Verification Reporting System (CAIVRS).

    HUD Handbook 2000.06, REV-4, sets specific timeframes for management decisions on
recommended corrective actions. For each recommendation without a management decision,
please respond and provide status reports in accordance with the HUD Handbook. Please furnish
us copies of any correspondence or directives issued because of the audit.

    The Inspector General Act, Title 5 United States Code, section 8M, requires that OIG post its
publicly available reports on the OIG Web site. Accordingly, this report will be posted at
http://www.hudoig.gov.

   If you have any questions or comments about this report, please do not hesitate to call me at
913-551-5870.




                                                Office of Audit Region 7
                                 400 State Avenue, Suite 501, Kansas City, KS 66101
                                      Phone (913) 551-5870, Fax (913) 551-5877
                          Visit the Office of Inspector General Web site at www.hudoig.gov.
                                            July 2, 2014
                                            The Data in CAIVRS Did Not Agree With the Data in
                                            FHA’s Default and Claims Systems




Highlights
Audit Report 2014-KC-0002



 What We Audited and Why                     What We Found

We reviewed the Credit Alert                HUD’s CAIVRS did not contain information on all
Verification Reporting System               borrowers’ default, foreclosure, and claim activity. It
(CAIVRS), the U.S. Department of            would incorrectly return accept codes for more than
Housing and Urban Development’s             260,000 borrowers who had been in default,
(HUD) shared database of defaulted          foreclosure, or claim within the past 3 years.
Federal debtors, due to our observations
during another audit (2013-KC-0004,         CAIVRS did not contain information for FHA
September 18, 2013). We noted that          borrowers with claims older than 3 years. Therefore,
only one borrower on a defaulted loan       HUD did not provide other Federal agencies with
typically received a negative result from   sufficient information on FHA borrowers with
the system, while the remaining             delinquent Federal debt to meet the requirements of the
borrowers received clear results. Our       Debt Collection Improvement Act, which bars
audit objective was to determine            delinquent Federal debtors from obtaining additional
whether the default and claims data in      Federal loans or loan guarantees until such
CAIVRS agreed with the data in the          delinquency is resolved. 
Federal Housing Administration’s
(FHA) default and claims systems.

 What We Recommend

We recommend that HUD document the
selection rules used for feeding data to
CAIVRS, update the rules to provide
for complete reporting of all ineligible
borrowers, and develop system error
checks to identify potential issues. We
also recommend that HUD report FHA
borrowers with delinquent Federal debt
beyond the 3-year claim period or
obtain an exemption from the Secretary
of the Treasury to exempt FHA loans
after 3 years.



                                                   
                            TABLE OF CONTENTS

Background and Objective                                                     3

Results of Audit
      Finding 1: CAIVRS Contained Incomplete Information on Delinquent FHA
                Borrowers                                                    5
      Finding 2: CAIVRS Excluded Claims Older Than 3 Years                   8

Scope and Methodology                                                        11

Internal Controls                                                            13

Appendixes
A.    Schedule of Funds To Be Put to Better Use                              14
B.    Auditee Comments and OIG’s Evaluation                                  15




                                            2
                      BACKGROUND AND OBJECTIVE

Title 31, U.S.C. (United States Code) 3720B, bars delinquent Federal debtors from obtaining
Federal loans or loan insurance guarantees. The Office of Management and Budget (OMB) has
mandated that all Federal credit agencies prescreen all applicants for nondelinquency in Federal
debt and, if practical, do the prescreening through a system of shared data.

The Credit Alert Verification Reporting System (CAIVRS) was developed by the U.S.
Department of Housing and Urban Development (HUD) in June 1987 as a shared database of
defaulted Federal debtors. CAIVRS has delinquent borrower records from HUD, the U.S.
Department of Veterans Affairs, the U.S. Department of Education, the U.S. Department of
Agriculture, the Small Business Administration, and the U.S. Department of Justice. CAIVRS is
the only system of shared delinquent Federal debtor records available to support the OMB
mandate.

CAIVRS enables processors of applications for Federal credit benefit to identify individuals who
are in default or have had claims paid on direct or guaranteed Federal loans or are delinquent on
other debts owed to Federal agencies. Authorized users may access CAIVRS via the Internet.
The system prompts the user to enter the Social Security number of the applicant. If the
applicant’s Social Security number is not in the database, the user will receive a clear
confirmation code (a code beginning with the letter “A”). If there is a record of default for the
borrower whose Social Security number was entered, the user will be given the name of the
agency reporting the default, the case number of the defaulted debt, the type of delinquency
(default, “D”; claim, “C”; foreclosure, “F”; lien or judgment, “J”) and a telephone number to call
for further information or assistance.

The Federal Housing Administration (FHA) provides mortgage insurance on loans made by
FHA-approved lenders, enabling them to provide credit to borrowers who might otherwise be
unable to access the capital markets to purchase or refinance a property. FHA is the largest
insurer of mortgages in the world, having insured more than 40 million properties since its
inception in 1934. FHA mortgage insurance provides lenders with protection against losses as a
result of homeowners’ defaulting on their mortgage loans. The lenders bear less risk because
FHA will pay a claim to the lender in the event of a homeowner’s default. Loans must meet
certain requirements established by FHA to qualify for insurance.

One of those requirements contained in HUD Handbook 4155.1, paragraph 4.A.7.b, states that
lenders must use CAIVRS to screen all borrowers except those involved in a streamline
refinance. The borrower is not eligible if CAIVRS indicates that he or she (1) is presently
delinquent on a Federal debt or (2) has had a claim paid within the previous 3 years on a loan
made and insured on his or her behalf by HUD. HUD says that CAIVRS reduces by almost 100
percent the risk of endorsing a mortgage for FHA insurance without knowledge of previous
delinquencies or defaults in Federal programs. According to HUD Handbook 4155.1, paragraph
4.A.7.a, CAIVRS is a Federal government-wide repository of information on those individuals
• with delinquent or defaulted Federal debt, and/or
• for whom the payment of an insurance claim has occurred.

                                                3
Our audit objective was to determine whether the default and claims data in CAIVRS agreed
with the data in FHA’s default and claims systems.




                                              4
                                               
                               RESULTS OF AUDIT


Finding 1: CAIVRS Contained Incomplete Information on Delinquent
FHA Borrowers
HUD’s CAIVRS did not contain default, foreclosure, and claim activity information for more
than 260,000 borrowers. HUD did not adequately design the process for feeding data to
CAIVRS from its other systems. As a result, CAIVRS could allow ineligible debtors to obtain
new Federal loans and loan insurance guarantees.


 Incomplete Default and Claim
 Information

              CAIVRS did not contain complete information on all FHA borrowers’ default,
              foreclosure, and claim activity.

              As of January 2014, CAIVRS did not include information on more than 252,000
              borrowers who were in default or foreclosure on their FHA-insured mortgages.
              These borrowers were generally the coborrowers on the loan. On rare occasions,
              the coborrower was reported to CAIVRS instead of the primary borrower.

              Also, as of January 2014, CAIVRS did not include information on nearly 6,000
              borrowers who had claims paid on their FHA-insured mortgages in the past 3
              years. These borrowers were the second, third, or fourth coborrowers on the
              loans.

              CAIVRS also did not include information on borrowers during the delay between
              when the lender reported the loan as a claim termination and when the lender
              submitted the claim and HUD processed and paid it. Specifically, CAIVRS
              excluded borrowers on nearly 2,000 loans that were delinquent and reported as
              claim terminations as of January 2014 but later had claims paid, which would then
              cause them to appear in the CAIVRS system. In addition, CAIVRS excluded
              borrowers on nearly 3,400 loans that lenders had reported as claim terminations
              since 2010 for which a claim had not been paid by HUD.

 Inadequate Data Feed

              HUD did not adequately design the process for feeding data to CAIVRS from its
              other systems. Each month, the default system provided CAIVRS with a file of
              Social Security numbers of borrowers who were in default or foreclosure or had a
              claim paid within the previous 36 months. This single file contained the merged
              records from the default system and the claims system.

                                              5
                                                
            HUD did not extract complete information on all borrowers from its default and
            claims systems for the monthly file provided to CAIVRS. The selection rules
            generally excluded coborrowers on loans and allowed for a gap in reporting
            between when a loan was reported as a claim and when a claim was paid and
            processed. While loans were in default or foreclosure, lenders generally entered
            the Social Security number for only the main borrower on the loan into the default
            system. Once HUD paid claims on these loans, the selection rules for claims
            added one coborrower listed on the claim form supplied by the lenders but no
            additional coborrowers.

            HUD also did not adequately document the selection rules used for feeding data
            to CAIVRS. We were provided with and reviewed multiple documents related to
            CAIVRS, including interface control documents and system run books. Interface
            control documents summarize the requirements and operation for a data interface
            between CAIVRS and another system. These documents are meant as a technical
            reference and therefore, its main audience is computer programmers, data base
            administrators and analysts, who develop software to either produce, analyze or
            handle data products. However, these documents did not provide information on
            which specific fields determined whether a loan was classified as a D-default, F-
            foreclosure, or C-claim in CAIVRS. While HUD provided some additional
            information through emails about its selection rules, this information should be
            formally documented in such a way that it is readily available and can be updated
            over time.

Ineligible Debtors Allowed To
Obtain New Federal Loans


            As a result of the deficiencies described above, CAIVRS could allow ineligible
            debtors to obtain new Federal loans and loan insurance guarantees. More than
            260,000 borrowers could receive an accept code from CAIVRS despite having
            defaults or claims on their FHA loans. If HUD, lenders, or other agencies
            performing prescreening procedures ran these borrowers in CAIVRS, they would
            receive incorrect results.

            For HUD and lender purposes, these incorrect results could lead to ineligible
            borrowers being approved for new loans in violation of FHA underwriting
            requirements. HUD Handbook 4155.1 4.A.2.g establishes a three-year waiting
            period for borrowers with past delinquencies, defaults or claims on FHA loans
            before they can regain eligibility for another FHA-insured mortgage.

            For example, in fiscal year 2013, FHA insured 63 new loans totaling $9.5 million,
            although the borrowers had recent claims. On all of these 63 new loans, the
            borrowers improperly received an accept “A” code from CAIVRS to qualify for
            the new loan. Therefore, the new lenders did not know that the borrowers had

                                            6
                                              
             delinquencies and foreclosures reported in HUD’s systems or that HUD had paid
             claims on their behalf. One of these new loans was to coborrower 1 on the
             original loan, who had a claim paid on his behalf on September 4, 2013, and
             closed on a new loan as the primary borrower on September 23, 2013, less than
             20 days from when the claim on the first loan was paid. This borrower was coded
             as “accept” in CAIVRS in September 2013.

             There were likely more improperly insured loans during 2013, since the 63 loans
             identified did not include borrowers who obtained a new loan while their old loan
             was in a default status but HUD had not yet paid a claim. These loans also did
             not include borrowers who obtained a new loan while their old loan was in a
             default status and ultimately resulted in a preforeclosure sale or deed in lieu.

             Furthermore, when other agencies use CAIVRS to screen for delinquent Federal
             debt, they would receive incorrect results to the extent that some of these loans
             are covered by the Debt Collection Improvement Act.

Conclusion

             HUD did not adequately design the process for feeding data to CAIVRS from its
             other systems. As a result, CAIVRS could allow ineligible debtors to obtain new
             Federal loans and loan insurance guarantees. CAIVRS did not contain complete
             information on all FHA borrowers’ default, foreclosure, and claim activity.
             Therefore, more than 260,000 borrowers could receive an accept code from
             CAIVRS despite having defaults or claims on their FHA loans.

Recommendations

             We recommend that the Deputy Assistant Secretary for Single Family Housing

             1A. Document the selection rules used for feeding data to CAIVRS to explain in
                 detail the flow of information from HUD’s systems.

             1B. Update selection rules for CAIVRS to provide for complete reporting of all
                 ineligible borrowers to put $9.5 million to better use.

             1C. Develop and implement system error checks to identify potential reporting
                 issues.




                                              7
                                                
Finding 2: CAIVRS Excluded Claims Older Than 3 Years
CAIVRS did not contain information for FHA borrowers with claims older than 3 years. This
condition occurred because HUD stopped reporting FHA claims to CAIVRS after 3 years since
these debtors were no longer ineligible for new FHA single-family loans. As a result, HUD did
not provide other Federal agencies with sufficient information on FHA borrowers with
delinquent Federal debt to meet the requirements of the Debt Collection Improvement Act.



 Claims Excluded After 3 Years

              CAIVRS did not contain information for FHA borrowers with claims older than 3
              years.

              Title 31, U.S.C. 3720B, bars delinquent Federal debtors from obtaining Federal
              loans or loan insurance guarantees. Regulations at 31 CFR (Code of Federal
              Regulations) 285.13(b)(5) state that a person may be eligible for Federal financial
              assistance only after the delinquency is resolved in accordance with this section.
              OMB has mandated that all Federal credit agencies prescreen all applicants for
              nondelinquency in Federal debt and, if practical, do the prescreening through a
              system of shared data.

              HUD promotes CAIVRS as a single repository of delinquent Federal debtor
              records to support the OMB mandate. CAIVRS provides records with easy
              access through the Internet to more than 61,000 authorized user IDs from HUD,
              the U.S. Department of Agriculture, the U.S. Department of Veterans Affairs, the
              Small Business Administration, the Federal Deposit Insurance Corporation, the
              U.S. Department of Education, and the U.S. Department of Justice. However,
              CAIVRS returned accept codes for borrowers on former FHA loans starting 3
              years after their claim was paid.

 Older Claims Not Needed by
 FHA

              HUD stopped reporting FHA claims to CAIVRS after 3 years because these
              debtors were no longer ineligible for new FHA single-family loans. FHA
              underwriting rules and regulations state that after a 3-year waiting period, a
              borrower may regain eligibility for another FHA-insured mortgage. HUD
              decided to discontinue reporting on these borrowers without obtaining permission
              from the Secretary of the Treasury to exempt these claims.

              The “Exemptions by the Secretary” regulations at 31 CFR 285.13(f) state that
              upon the written request and recommendation of the head of the creditor agency
              to which a class of debts is owed, the Secretary of the Treasury may exempt any

                                               8
                                                 
             class of debts from affecting a debtor’s eligibility for Federal financial assistance.
             We asked HUD for evidence that it had sought an exemption from the Secretary
             of the Treasury to exclude claims after 3 years. No evidence was provided.

Insufficient Data on Delinquent
FHA Debtors

             HUD did not provide other Federal agencies with sufficient information on FHA
             borrowers with delinquent Federal debt to meet the requirements of the Debt
             Collection Improvement Act. HUD’s previously published written guidance such
             as Mortgagee Letter 91-31 has considered FHA-insured loans to be Federal
             debt. In addition, OMB guidance in Circular A-129 treats delinquent loans
             guaranteed or insured by the Federal Government as delinquent Federal debt.
             Furthermore, regulations at 31 CFR 285.13(d)(3) state that a debt is in delinquent
             status even if the creditor agency has suspended or terminated collection activity
             with respect to such debt. The regulations further state that a person’s delinquent
             debt is resolved only if the person pays or satisfies the debt or enters into a
             repayment agreement.

             Users from the six other Federal agencies that access CAIVRS may rely on the
             results they receive for borrowers on these former FHA loans. Because HUD
             stopped reporting claims after a 3-year period, other agencies would not be aware
             of the previous claims paid on the borrowers’ behalf by HUD. Some of these
             excluded claims would meet the definition of delinquent Federal debt, since the
             passage of time does not impact whether or not a delinquent Federal debt exists.
             Therefore, these agencies could unknowingly violate the Debt Collection
             Improvement Act by granting new Federal debt to these ineligible borrowers.

Conclusion

             HUD stopped reporting FHA claims to CAIVRS after 3 years because these
             debtors were no longer ineligible for new FHA single-family loans. HUD did not
             document the resolution of delinquent Federal debt prior to the removal of the
             debtors’ identification from CAIVRS. HUD’s comments to this audit report
             indicate that it considers very few FHA claims to be Federal debt.

Recommendations

             We recommend that the Deputy Assistant Secretary for Single Family Housing

             2A. Update CAIVRS’ selection rules to report delinquent Federal debt beyond the
                 3-year claim period or obtain an exemption from the Secretary of the Treasury
                 to exempt FHA loans after 3 years.



                                               9
                                                 
2B. Notify the users of CAIVRS that the system may have incomplete information
    for FHA delinquent Federal debtors.

2C. Obtain a determination from the Secretary of Treasury of whether FHA-
    insured loans meet the definition of Federal debt.




                               10
                                 
                         SCOPE AND METHODOLOGY

To accomplish our objectives, we

      Reviewed relevant laws, regulations, and HUD guidance.
      Reviewed HUD’s policies and procedures.
      Reviewed CAIVRS internal control documents in the Cyber Security Assessment and
       Management tool.
      Reviewed CAIVRS monthly reports.
      Interviewed relevant HUD management and staff.
      Reviewed relevant background pages on HUD’s internal and external Web sites.
      Reviewed prior U.S Government Accountability Office and HUD Office of Inspector
       General (OIG) reviews.

We analyzed computer-processed data contained in HUD’s Single Family Data Warehouse and
Neighborhood Watch systems and from the CAIVRS mainframe to demonstrate the need for
additional selection rules and identify potential issues that should be considered by HUD while
implementing our recommendations. Although we did not perform a detailed assessment of the
reliability of the data, we did perform electronic testing of data elements and interviewed agency
officials knowledgeable about the data. Based on the work performed, we determined that the
computer-processed data were sufficiently reliable for the purposes of this report.

The data used from the Single Family Data Warehouse included data that originated from several
of HUD’s single-family systems, such as the A43C Single Family Default Monitoring System
(default system), F42D Single Family Insurance System - Claims Subsystem (claims system),
and the F17 Computerized Homes Underwriting Management System (CHUMS). Specifically,
we used select fields from the following Single Family Data Warehouse tables: idb_1,
idb_1_coborrower, sfdw_default_current_detail, and claims_form_1.

The Single Family Data Warehouse is a large and extensive collection of database tables
organized and dedicated to support the analysis, verification, and publication of Single Family
Housing data. CHUMS supports Housing staff in the processing of single family mortgage
insurance applications from initial receipt through endorsement. Neighborhood Watch Early
Warning System is intended to aid HUD/FHA staff in monitoring lenders and HUD programs
and to aid lenders and the public in self-policing the industry.

To determine how many borrowers were excluded from CAIVRS on loans that were in its
January 2014 CAIVRS borrower history table, we compared the number of borrowers for each
loan from CAIVRS to the number of borrowers for these same loans in the idb_1 /
idb_1_coborrower tables in the Single Family Data Warehouse. The borrower data in the idb_1
and idb_1_coborrower tables is from F17 (CHUMS).

To determine how many loans were excluded from CAIVRS due to a delay from when the loan
was reported as a claim termination in the default system to when the loan was reported as a
claim paid in the claims system, we analyzed data from CAIVRS and the default and claims
                                                11
                                                  
systems. We focused on loans with a claim termination type in the default system that were
likely to result in one of the claim types selected by CAIVRS. As of March 2014, we had
identified 3,383 loans that had been reported as relevant claim terminations since 2010 for which
a claim had not been paid. Based on HUD’s selection rules for CAIVRS, these loans would not
be included in CAIVRS again until a claim was processed and paid. We also identified 1,968
loans that were at least 90 days delinquent at the time of the January 2014 CAIVRS data but
were not included in the data because they had been reported as a claim termination in the
default system but a claim had not been paid according to the claims system. These claims have
since been paid so they should now be classified as a claim in CAIVRS.

To partially illustrate the effect of CAIVRS’ not containing all data that it should on loans in
default or claim, we matched borrower data from CHUMS on endorsed loans closed between
October 2012 and September 2013 against borrower data from CHUMS on loans that had a
claim type and status that would have been captured by CAIVRS based on claims data from
August 2009 forward. For the new loans, we performed the match only on loans for which the
lender was required to check the borrowers in CAIVRS, which eliminated streamline refinance
loans. This analysis identified 2,324 potential matches. From the 2,324 matches, we identified
321 Social Security number matches that we believed were the Social Security numbers of
borrowers for whom the new FHA loan was closed either before or during the period when the
borrower should have been in CAIVRS for a claim episode on a previous FHA loan. We
performed additional analysis on these matches using data in CAIVRS, the Single Family Data
Warehouse, and HUD’s Neighborhood Watch system as needed. We identified a total of 67
instances in which a borrower received an accept code in CAIVRS and obtained a new loan
when he or she should not have received the accept code based on the delinquency status of the
prior loan. This process resulted in identifying 63 unique new loans that were closed between
October 2012 and September 2013.

To determine the number of loans older than 3 years that CAIVRS excluded, we analyzed claims
system records that met the CAIVRS selection rules for claim type and status. We then
compared the claims system records against the January 2014 CAIVRS data to identify loans that
were not captured by CAIVRS. We identified more than 1.3 million loans that were not included
in the January 2014 CAIVRS data. According to the claims system, the claims for these loans
were processed before January 2011.

We performed our audit work between September 2013 and March 2014. We conducted audit
fieldwork at our office in St. Louis, MO. Our audit period generally covered August 1, 2009,
through March 31, 2014.

We conducted the audit in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our audit
objective(s). We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.




                                               12
                                                  
                              INTERNAL CONTROLS

Internal control is a process adopted by those charged with governance and management,
designed to provide reasonable assurance about the achievement of the organization’s mission,
goals, and objectives with regard to

      Effectiveness and efficiency of operations,
      Reliability of financial reporting, and
      Compliance with applicable laws and regulations.

Internal controls comprise the plans, policies, methods, and procedures used to meet the
organization’s mission, goals, and objectives. Internal controls include the processes and
procedures for planning, organizing, directing, and controlling program operations as well as the
systems for measuring, reporting, and monitoring program performance.


 Relevant Internal Controls

               We determined that the following internal controls were relevant to our audit
               objective:

                     Controls to ensure that CAIVRS receives all relevant delinquency and claims
                      data on Title II borrowers.


               We assessed the relevant controls identified above.

               A deficiency in internal control exists when the design or operation of a control does
               not allow management or employees, in the normal course of performing their
               assigned functions, the reasonable opportunity to prevent, detect, or correct (1)
               impairments to effectiveness or efficiency of operations, (2) misstatements in
               financial or performance information, or (3) violations of laws and regulations on a
               timely basis.

 Significant Deficiencies

               Based on our review, we believe that the following items are significant deficiencies:

                     HUD did not adequately design the process for feeding data to CAIVRS
                      from its other systems (finding 1).

                     HUD stopped reporting FHA claims to CAIVRS after 3 years because
                      these debtors were no longer ineligible for new FHA single-family loans
                      (finding 2).
                                                 13
                                                   
                                    APPENDIXES

Appendix A

     SCHEDULE OF FUNDS TO BE PUT TO BETTER USE

                    Recommendation       Funds to be put
                        number           to better use 1/
                          1B                $9,501,619




1/   Recommendations that funds be put to better use are estimates of amounts that could be
     used more efficiently if an OIG recommendation is implemented. These amounts include
     reductions in outlays, deobligation of funds, withdrawal of interest, costs not incurred by
     implementing recommended improvements, avoidance of unnecessary expenditures
     noted in preaward reviews, and any other savings that are specifically identified.

     In this instance, if HUD implements our recommendations, it will ensure that FHA
     insures new loans only for eligible borrowers. It will no longer insure new loans for
     borrowers who have had recent claims paid on their behalf by the FHA insurance
     fund. In fiscal year 2013, we identified $9.5 million in ineligible mortgages as being
     insured due to CAIVRS’ returning incorrect results. We expect a similar number of
     ineligible mortgages to be insured next year if HUD does not make the needed
     corrections to its CAIVRS system. This amount is conservative as it does not take into
     account borrowers, whose FHA loan claims have not been paid, who obtained a new loan
     while their old loan was in a default status. It also does not consider whether borrowers,
     who ultimately completed a preforeclosure sale or deed in lieu, obtained a new loan while
     their old loan was in a default status.




                                             14
                                               
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




                         15
                           
Ref to OIG Evaluation   Auditee Comments




Comment 1




Comment 2




                         16
                           
Ref to OIG Evaluation   Auditee Comments




Comment 3




                         17
                           
                         OIG Evaluation of Auditee Comments

Comment 1   Previous departmental guidance has treated FHA-insured loans as Federal
            debt. HUD is now reconsidering this definition. The Debt Collection
            Improvement Act does not give HUD the authority to define Federal
            debt. Therefore, we have added recommendation 2C for HUD to request a
            determination from the Secretary of Treasury of whether FHA-insured loans meet
            the definition of Federal Debt.

Comment 2   We updated the language in the recommendation to clarify that additional
            reporting is only required for claims qualifying as delinquent Federal debt.

Comment 3   If FHA updates the other users of CAIVRS of its intention to revise reporting and
            the current state of CAIVRS data, it will satisfy this recommendation.




                                             18