oversight

FHA Paid Claims for an Estimated 239,000 Properties That Servicers Did Not Foreclose Upon or Convey on Time

Published by the Department of Housing and Urban Development, Office of Inspector General on 2016-10-14.

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

        Federal Housing Administration,
                Washington, DC
            Single-Family Mortgage Insurance Claims




Office of Audit, Region 7        Audit Report Number: 2017-KC-0001
Kansas City, MO                                    October 14, 2016
To:            Robert Mulderig, Acting Deputy Assistant Secretary, Office of Single Family
               Housing, HU
               George Rabil, Deputy Assistant Secretary, Office of Finance and Budget, HW
               //signed//
From:          Ronald J. Hosking, Regional Inspector General for Audit, 7AGA
Subject:       FHA Paid Claims for an Estimated 239,000 Properties That Servicers Did Not
               Foreclose Upon or Convey on Time




Attached is the U.S. Department of Housing and Urban Development (HUD), Office of Inspector
General’s (OIG) final results of our review of HUD’s monitoring and payment of conveyance
claims upon termination of Federal Housing Administration-insured mortgages.
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.
                   Audit Report Number: 2017-KC-0001
                   Date: October 14, 2016

                   FHA Paid Claims for an Estimated 239,000 Properties That Servicers Did
                   Not Foreclose Upon or Convey on Time


Highlights

What We Audited and Why
We reviewed the Federal Housing Administration’s (FHA) monitoring and payment of single-
family conveyance claims. A conveyance claim occurs when the holder of the mortgage loan
transfers the property to the U.S. Department of Housing and Urban Development (HUD) and
submits a claim for FHA insurance benefits. These functions are located in HUD’s Office of
Single Family Housing and Office of Finance and Budget. We initiated our review due to
concerns that HUD overpaid servicers’ claims for FHA insurance benefits. Our audit objective
was to determine whether HUD paid servicers’ claims for properties that did not foreclose or
convey on time.

What We Found
HUD paid claims for an estimated 239,000 properties that servicers did not foreclose upon or
convey on time. HUD paid an estimated $141.9 million for servicers’ claims for unreasonable
and unnecessary debenture interest that was incurred after the missed foreclosure or conveyance
deadline and an estimated $2.09 billion for servicers’ claims for unreasonable and unnecessary
holding costs that were incurred after the deadline to convey. While it was reasonable for
servicers to pay costs to preserve the property and complete the foreclosure process, it was
unnecessary and unreasonable for HUD to pay for such costs after the date the servicer was
required to convey. The claim would have been reduced if servicers conveyed on time and these
funds would have been available for the needs of the FHA mortgage insurance fund.

What We Recommend
We recommend that HUD issue a change to 24 CFR (Code of Federal Regulations) Part 203,
which corrects deficiencies that allowed an estimated $2.23 billion in unreasonable and
unnecessary costs to the FHA insurance fund. These changes include a maximum period for
filing insurance claims and disallowance of expenses incurred beyond established timeframes.
We recommend that HUD develop a strategic information technology plan to make significant
operational changes to HUD’s monitoring of single-family conveyance claims to ensure that
servicers comply with foreclosure and conveyance timeframes. We also recommend that HUD
develop and implement controls to identify noncompliance with current regulations at 24 CFR
203.402.
Table of Contents
Background and Objective......................................................................................3

Results of Audit ........................................................................................................5
         Finding 1: HUD Paid Claims for Properties That Servicers Did Not Foreclose Upon
         or Convey on Time ............................................................................................................ 5

Scope and Methodology .........................................................................................14

Internal Controls ....................................................................................................16

Appendixes ..............................................................................................................17
         A. Schedule of Questioned Costs .................................................................................. 17
         B. Auditee Comments and OIG’s Evaluation ............................................................. 18
         C. Criteria ....................................................................................................................... 22
         D. Sampling and Projections......................................................................................... 26
         E. Missed Deadlines ....................................................................................................... 29




                                                                     2
Background and Objective
The U.S. Department of Housing and Urban Development’s (HUD) Federal Housing
Administration (FHA) provides mortgage insurance on home loans made by its approved
lenders. This insurance is paid for by borrowers and provides lenders and servicers with
protection against losses if the homeowner defaults on the loan. Servicers may submit an
insurance claim to HUD for losses incurred if a property is foreclosed upon. However, the
servicer must first attempt to work with the homeowner and consider options available as part of
HUD’s loss mitigation program, which can assist the borrower in bringing the loan current or
allow the borrower to dispose of the home without foreclosure. If loss mitigation is not
successful, conveyance of the property title to HUD is one option available to servicers.
During a conveyance claim, the servicer obtains the property through foreclosure and transfers
the property to HUD. The servicer then submits a claim to HUD for its unpaid mortgage
principal and other holding costs. These holding costs include legal, property acquisition, taxes,
ground rents, utility, insurance, operating, protection, preservation, inspection, and debris
removal costs. HUD conducts servicer monitoring and pre-conveyance property reviews within
the Office of Single Family Housing. HUD processes conveyance claims for payment and
conducts postclaim reviews within the Office of Finance and Budget.
Table 1 shows the loan amounts for all currently insured FHA loans, the seriously delinquent
rate, and the percentage of total loans in foreclosure. The seriously delinquent rate is the sum of
90-day delinquencies, loans in foreclosure, and bankruptcies.
Table 1

     FHA single-family performance
                                                 2013               2014              2015
                metrics
          Active insurance ($ million)      $7,818,596         $7,758,608        $7,779,458
       Seriously delinquent rate (%)            8.02              7.00               5.79
              In foreclosure (%)                2.21              2.14               1.85


HUD issues yearly actuarial reports about the projected gains, losses, and other risks to the FHA
insurance fund. As of June 30, 2015, FHA estimated that more than 130,000 loans had begun
the foreclosure process but claims had not been filed. Of these, more than 31,000 loans showed
indications of foreclosure or conveyance delays as of the end of July 2015. HUD estimated that
these delayed claims could result in a more than $150 million reduction in economic value of the
FHA insurance fund.
In July 2015, HUD submitted a proposed rule for public comment in the Federal Register (FR-
5742). HUD proposed to establish a maximum period for servicers to file a claim for insurance
benefits and curtail servicers’ claims for property preservation and administrative costs occuring


                                                 3
after the date on which the servicer should have filed a claim. HUD proposed to allow servicers
12 months from the expiration of the reasonable diligence timeline to convey the property. HUD
stated that the proposed rule would improve its ability to protect the FHA insurance fund.
The proposed rule was not implemented. Mortgage servicers expressed concern that such changes
were not realistic, citing unavoidable delays in the foreclosure process. HUD continued to pursue
changes to FHA program regulations and has met with leaders in the mortgage industry to reissue
proposed changes.
Our objective was to determine whether HUD paid claims for properties that servicers did not
foreclose upon or convey on time. This report is specific to conveyance claims only and does not
address other FHA insurance termination options, including preforeclosure, third-party, or note sale
claims. These other termination options could have resulted in additional loans for which servicers
missed their foreclosure deadlines. Conveyances make up approximately 56 percent of all single-
family FHA claim terminations.




                                                  4
Results of Audit

Finding 1: HUD Paid Claims for Properties That Servicers Did Not
Foreclose Upon or Convey on Time
HUD paid claims for an estimated 239,000 properties that servicers did not foreclose upon or
convey on time. This condition occurred because HUD did not have adequate controls to ensure
that servicers complied with Federal regulations. As a result, HUD paid an estimated $141.9
million for servicers’ claims for unreasonable and unnecessary debenture interest that was
incurred after the missed foreclosure or conveyance deadline and an estimated $2.09 billion for
servicers’ claims for unreasonable and unnecessary holding costs that were incurred after the
deadline to convey.
HUD Paid Claims for an Estimated 239,000 Properties That Servicers Did Not Foreclose
Upon or Convey on Time
Servicers missed their foreclosure and conveyance deadlines and did not report proper self-
curtailment dates of their debenture interest (interest on the mortgage loan balance).
We reviewed a statistical sample of 90 claims HUD paid from nearly 250,000 with indicators
that they had missed their deadlines in the past 5 years. We reviewed each loan in our sample
using applicable regulations, HUD handbooks, and mortgagee letters to determine whether
servicers foreclosed or conveyed on time (appendix C). The conveyance deadline is important
because it is the date the servicer transfers title to the property and all associated responsibilities
to HUD. Of the 90 loans reviewed, 89 missed a foreclosure deadline, a conveyance deadline, or
both. We projected the sample results to our universe of nearly 250,000 claims to determine that
HUD paid claims for 238,978 properties that servicers did not foreclose upon or convey on time
(appendix D).
Servicers Missed Their Foreclosure Deadlines
Servicers missed their deadlines to initiate foreclosure, finalize foreclosure and secure the
properties, and convey the properties to HUD. The foreclosure and conveyance process is
sequential, so when a servicer misses the foreclosure deadline, it is more likely to miss the
conveyance deadline as well. It is necessary to evaluate all three timelines in order to determine
the proper curtailment date and to determine whether the conveyance is ultimately on time.
Table 2 below shows how often servicers did not meet these different deadlines for the loans
reviewed.




                                                   5
Table 2

                                                                   Number      Percentage
      Missed deadline
                                                                   of loans    of sample
      Deadline to initiate foreclosure                                56              62
      Deadline to finalize foreclosure and secure the property        68              76
      Deadline to convey the property to HUD                          87              97
      Loans that missed any deadline of the sample size of 90         89              99

Appendix E shows how late the servicer initiated foreclosure, finalized foreclosure, and
conveyed the properties for each of the sampled loans.
Servicers missed their deadlines to initiate foreclosure for 56 of 90 loans in our sample.
Regulations at 24 CFR (Code of Federal Regulations) 203.355(a) state that servicers must start
foreclosure within 6 months from the date of default. Regulations at 24 CFR 203.331(b) define
date of default as 60 days from the last completed mortgage payment. For these 56 loans,
servicers were late initiating foreclosure by an average of 419 days, or approximately 14 months.
The longest delay was on a loan that missed this deadline by 1,862 days.
Servicers missed their deadlines to finalize foreclosure and secure the properties for 68 of 90
loans in our sample. Regulations at 24 CFR 203.356(b) state that servicers must exercise
reasonable diligence in prosecuting the foreclosure proceedings to completion and acquiring title
to and securing the property. HUD defines reasonable diligence for each State through the
issuance of mortgagee letters. Reasonable diligence varies from 3 to 30 months, depending on
the State and the period covered by the various mortgagee letters. For these 68 loans, servicers
were late foreclosing upon and securing the properties by an average of 523 days, or
approximately 17 months. The longest delay was on a loan that missed this deadline by 1,779
days.
Servicers missed their deadlines to convey the properties to HUD for 87 of 90 loans in our
sample. Regulations at 24 CFR 203.359(b) state that servicers must obtain good and marketable
title and transfer the property to HUD within 30 days of securing the property. If the servicer
arranges to convey the property directly to HUD, it must ensure that the property is transferred to
HUD within 30 days of the reasonable diligence timeframe discussed in the previous paragraph.
For these 87 loans, servicers were late conveying the properties to HUD by an average of 495
days, or approximately 17 months. The longest delay was on a loan that missed this deadline by
1,896 days.
Servicers Did Not Report Proper Self-Curtailment Dates
Servicers did not report to HUD the proper self-curtailment date to allow HUD to accurately
curtail debenture interest. Regulations at 24 CFR 203.402(k) disallow a portion of debenture
interest on servicers’ claims if the servicer missed a deadline during the foreclosure and
conveyance process. Servicers self-report, or self-curtail, to HUD if they missed a deadline and
report this information in a designated section of their insurance claim form. HUD relies on the
accuracy of this self-reported date, as well as other information provided on the claim, to



                                                 6
calculate the proper amount of debenture interest to pay. Servicers should have reported a self-
curtailment date for 89 of the 90 loans in our sample, but they reported on only 49.
HUD Did Not Have Adequate Controls To Ensure Servicer Compliance
HUD did not have adequate controls to ensure that servicers complied with Federal regulations.
FHA program regulations at 24 CFR Part 203 do not establish a maximum period for filing a
claim, and they do not place limitations on holding costs when servicers do not meet all
foreclosure and conveyance deadlines. In addition, HUD monitored only a small percentage of
servicers after the claim had been paid.
Regulations at 24 CFR Part 203 Do Not Establish a Maximum Period for Filing a Claim
Program regulations allow servicers to file a claim at any time. Without regulatory authority,
HUD has few options to compel servicers to convey and file a claim. Further, other major
guarantors of mortgage loans have established maximum periods with recurring penalties to
ensure compliance.
Program regulations establish time
requirements for initiating foreclosure from      Regulations allow servicers to file a
the default date, securing the property from      claim at any time.
the initiation of foreclosure date, and
conveying the property to HUD from the date
the foreclosure was finalized and the property was secured. But they do not establish a
maximum time requirement from the initiation of the process or default date to the completion or
submission of a claim.
Currently, HUD has few options to compel servicers to convey and file a claim in a timely
manner. Program regulations allow HUD to disallow mortgage interest when a servicer misses a
foreclosure deadline, but HUD has no further recourse to protect itself from servicers that have
already missed a deadline but have yet to convey. Therefore, if a servicer missed its deadline to
initiate foreclosure, it had already forfeited its mortgage interest and had no further financial or
regulatory incentives to meet its remaining deadlines.
Other leaders in the mortgage industry, such as the Federal National Mortgage Association
(Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac), have established
maximum periods for completing foreclosure with recurring penalties to enforce servicer
compliance. Similar to FHA, Fannie and Freddie set mortgage loan servicing rules. However,
unlike FHA, Fannie and Freddie charge consistent, recurring compensatory fees if the servicer
exceeds its maximum period to foreclose. Fannie and Freddie continue to charge fees until the
servicer has complied.
Regulations at 24 CFR Part 203 Do Not Limit Allowable Holding Costs
Program regulations do not limit holding costs when servicers do not meet all foreclosure and
conveyance deadlines. During the foreclosure process, servicers continued to pay and accrue
holding costs. Servicers later included these items in their claim for insurance benefits. If the
servicer missed a foreclosure deadline, however, HUD treated these costs differently from
mortgage interest. With one exception explained in the following paragraph, the regulations
allow servicers to include holding costs in their claims for an indefinite period beyond a


                                                  7
servicer’s missed deadline, unlike mortgage interest. As a result, servicers had less incentive to
convey properties to HUD because their cost of holding and preserving the property was
transferred to HUD.
Program regulations only allow servicers to claim property protection, operation, preservation, or
debris removal costs if the servicer conveys within 30 days of securing the property. However,
the regulations do not consider the servicer’s compliance with meeting prior deadlines in
allowing these costs. For example, a servicer could miss its foreclosure and reasonable diligence
deadlines by 2 years, convey within 30 days of securing the property, and include these costs in
its claim. Also, regulations currently allow taxes, insurance, and other foreclosure costs, which
make up the bulk of holding costs, regardless of the servicers’ compliance with any required
deadline.
HUD Monitored Only a Small Percentage of Servicers After the Claim Had Been Paid
HUD did not monitor claims during its preclaim and claims processing functions to ensure that
servicers met required deadlines. HUD monitored only a small percentage of servicers after the
claim had been paid. In addition, HUD’s information systems lacked automated checks to
identify servicers’ missed deadlines, and they required manual data entry to facilitate essential
functions.
When conducting preclaim monitoring, HUD selected servicers using a ranking system that did
not consider a servicer’s history in meeting foreclosure deadlines. HUD’s Quality Assurance
Division conducted regular servicer reviews to ensure compliance with FHA program
regulations. In selecting a servicer to review, the Division considered the servicer’s Tier
Ranking System (TRS) score. TRS scores indicate a servicer’s compliance with several FHA
program regulations. However, a servicer’s ability to meet foreclosure and conveyance
deadlines was not considered in HUD’s development of TRS scores. In addition, the Quality
Assurance Division selected a nonstatistical or nonrepresentative sample of loans to review
during its servicer reviews. We provided the Division our sample of 90 claims to determine
whether it had reviewed these claims; however, it had not reviewed any of the claims in our
sample.
HUD did not monitor claims during its claims processing function to ensure that servicers met
required deadlines. When a servicer submitted a claim, HUD conducted system checks to verify
the accuracy of information about the servicer, FHA-insured mortgage loan, and property. But
HUD did not perform system checks to determine whether servicers met their foreclosure
deadlines. HUD also reviewed servicer-submitted expenses for reasonableness. For any
deficiencies identified, HUD would suspend the claim and request that the servicer submit
supporting documentation. During these front-end reviews, HUD reviewed loan documentation
to verify the accuracy and existence of claimed expenses. But it did not verify the accuracy of
claimed foreclosure dates or whether the servicer reported the proper self-curtailment date.
While HUD’s postclaim reviews were adequate in identifying servicers’ missed deadlines, HUD
monitored only a small percentage of servicers after the claim had been paid . HUD had three
staff members and a contractor to conduct postclaim servicer reviews. The three staff members
had additional duties that took as much as 50 percent of their time away from conducting
postclaim reviews. Since fiscal year 2014, the contractor had conducted 54 servicer reviews.


                                                 8
There are more than 1,800 FHA-approved servicers. HUD’s participation in the Small Business
Administration 8(a) program compelled HUD to take on a small contractor in a high-volume
operating environment. The 8(a) program gives small businesses preference when applying for
government contacts. We provided HUD our sample of 90 claims to determine whether it had
conducted postclaim reviews on these claims; however, HUD had not reviewed any of the claims
in our sample.
HUD’s information systems lacked automated checks to identify servicers’ missed deadlines.
HUD’s Single Family Default Monitoring System (SFDMS) tracks data on delinquent mortgages
until a delinquency is cured or a claim is submitted. Servicers must electronically report the
monthly status of their defaulted loans in SFDMS. However, SFDMS did not perform
automated checks, nor did it throw warning flags if a servicer missed a foreclosure deadline.
Servicers could report on their delayed FHA-insured loans for years without an automated
notification being sent to HUD.
HUD’s A43C Claims system processes single-family insurance claims. The Claims system, like
SFDMS, did not perform automated checks or throw flags if a servicer missed a foreclosure
deadline. It also did not compare dates reported on the claim with servicers’ monthly reporting
in SFDMS to identify inconsistencies. HUD expressed concern to us that its 30-year-old Claims
system made it difficult to implement automatic checks. In contrast, HUD’s Integrated Real
Estate Management System, a multifamily system, performed automated checks of program
participants’ submitted financial information to identify noncompliance. For any deficiencies
identified, the system threw a flag alerting HUD.
HUD’s information systems required manual data entry to facilitate essential functions. The
Claims system forced HUD to require servicers to submit paper documentation for its front-end
reviews, supplemental claims, and postclaim reviews. Such documentation was often extensive
and required significant HUD staff time to review. For example, during front-end reviews,
servicers sent paper packets, sometimes exceeding 100 pages, with the servicer’s handwriting
marked throughout. HUD staff had to manually review the packet and the servicer’s handwritten
notes and manually enter adjustments into the Claims system.
The FHA Insurance Fund Was Unnecessarily Depleted by an Estimated $2.23 Billion in
Paid Claims
HUD paid an estimated $141.9 million for servicers’ claims for unreasonable and unnecessary
debenture interest that was incurred after the missed foreclosure or conveyance deadline and an
estimated $2.09 billion for servicers’ claims for unreasonable and unnecessary holding costs that
were incurred after the deadline to convey. In addition, HUD incurred post conveyance costs on
properties that were not conveyed on time and could face difficulties in protecting the FHA
insurance fund if servicers continue to delay their conveyances to HUD.
Table 3 below shows HUD’s payments for debenture interest and holding costs.




                                                9
Table 3

                         Claim payment type                              Amount

                 HUD payments for debenture interest                $141,946,340
                   HUD payments for holding costs                   2,096,775,124

                                  Total                             2,238,721,464


HUD Paid an Estimated $141.9 Million for Servicers’ Claims for Debenture Interest
HUD paid an estimated $141.9 million for servicers’ claims for unreasonable and unnecessary
debenture interest on properties that were not conveyed on time. HUD calculated the amount of
debenture interest due to the servicer using the unpaid mortgage principal and the number of
days it took the servicer to complete the foreclosure and conveyance processes. A shorter period
would result in less debenture interest due to the servicer.
HUD Paid an Estimated $2.09 Billion for Servicers’ Claims for Holding Costs
HUD paid an estimated $2.09 billion for servicers’ claims for unreasonable and unnecessary
holding costs. This figure is based on the statistical projection of the costs that occurred after the
reasonable deadline to convey for the 90 loans in our sample. Table 4 summarizes the
approximate number of months the servicers were late in conveying and the average amount of
the costs after the deadline for the 87 loans conveyed late in our sample.
Table 4

   Sample results summarized by how late the            Number      Average holding costs after
   property was conveyed                                of loans    conveyance deadline
   Within 6 months                                         26                     $    2,864.38
   After 6 months but within 12 months                     19                          7,899.68
   After 12 months but within 18 months                     7                         11,694.80
   After 18 months but within 24 months                    11                         13,163.55
   After 24 months                                         24                         17,052.50
   Total                                                   87


In many cases, these funds were used to keep up properties that had been vacant for more than a
year. As part of the conveyance process, servicers acquired 73 of the properties in our sample
and allowed them to sit vacant for an average of 142 days before preparing and submitting the
insurance claims to HUD. During this time and under current regulations, servicers continued to
accrue holding costs, which ended up being included in their claims for insurance benefits.
While it was reasonable for servicers to pay holding costs to preserve the property and complete
the foreclosure process, it was unnecessary and unreasonable for HUD to pay for such costs after
the date the servicer was required to convey. The claim would have been reduced if servicers


                                                   10
conveyed on time. While the exact amount of the reduction is unclear since certain legal and
foreclosure costs are unavoidable, HUD’s payment for many other periodic costs associated with
preserving the property would have been avoided if the servicer had conveyed on time. This
would have made additional funds available for the needs of the FHA mortgage insurance fund.
HUD Incurred Postconveyance Costs on Properties That Were Not Conveyed on Time
HUD incurred additional repair, maintenance, and selling costs on properties that were not
conveyed on time. Regulations at 24 CFR 203.377 require servicers to take reasonable action to
protect and preserve a vacant property. As noted above, servicers included these costs in their
claims. After conveyance, HUD prepared the property to be sold. The following two examples
illustrate how HUD incurred additional costs by selling properties that were not conveyed on
time.
For one claim in our sample, HUD estimated more than $5,000 in postconveyance repair costs
and paid more than $6,000 in administrative costs in addition to more than $17,000 in holding
costs that occurred after the date on which it should have conveyed the property under the
regulations.




The property was vacant for 891 days before the servicer conveyed it to HUD. The servicer
conveyed the property 731 days late. HUD paid more than $140,000 to settle the servicer’s
unpaid mortgage loan balance and sold the property 4 months later for $20,000.
For a different claim in our sample, HUD estimated more than $5,000 in postconveyance repair
costs and paid more than $8,000 in administrative costs in addition to more than $10,000 in
holding costs that occurred after the date on which it should have conveyed the property under
the regulations.




                                               11
The property was vacant for 358 days before the servicer conveyed it to HUD. The servicer
conveyed the property 1,896 days late. HUD paid more than $62,000 to settle the servicer’s
unpaid mortgage loan balance and sold the property 3 months later for $67,900.
HUD Could Face Difficulties in Protecting the FHA Insurance Fund
HUD could face difficulties in protecting the FHA insurance fund if servicers continue to delay
their conveyances to HUD. In its 2015 actuarial report on the FHA insurance fund, HUD
projected that it might incur losses because of servicers’ delayed foreclosures and conveyances.
HUD reported concern that delayed foreclosures limited its ability to identify risks to the FHA
insurance fund.
Conclusion
HUD paid claims for an estimated 239,000 properties that servicers did not foreclose upon or
convey on time because regulations at 24 CFR Part 203 did not enable HUD to provide effective
oversight and HUD monitored only a small percentage of servicers after the claim had been paid.
Because it didn’t have stronger controls, HUD paid an estimated $2.23 billion in unreasonable
and unnecessary costs on these claims.
Recommendations
We recommend that the Acting Deputy Assistant Secretary for Single Family Housing
       1A.     Issue a change to regulations at 24 CFR Part 203, which corrects deficiencies that
               allowed an estimated $2.23 billion in unreasonable and unnecessary costs to the
               FHA insurance fund. These changes include (1) a maximum period for filing
               insurance claims and (2) disallowance of expenses incurred beyond established
               timeframes.




                                                12
We recommend that the Deputy Assistant Secretary for Finance and Budget
       1B.    Develop a strategic information technology plan to make significant operational
              changes to HUD’s monitoring of single-family conveyance claims to ensure that
              servicers comply with foreclosure and conveyance timeframes.
       1C.    Develop and implement controls to identify noncompliance with current
              regulations at 24 CFR 203.402.




                                              13
Scope and Methodology
Our audit period generally covered January 1, 2010, through July 31, 2016. We performed our
audit work from April through July 2016. We conducted onsite work at HUD headquarters, 451
7th Street SW, Washington, DC, and the HUD Oklahoma field office at 301 NW 6th Street,
Oklahoma City, OK.
To accomplish our objective, we

      Reviewed applicable laws and regulations;
      Reviewed HUD’s policies and procedures;
      Interviewed HUD officials;
      Reviewed HUD actuarial reports and audited financial statements;
      Reviewed servicer submissions to HUD, including default status reporting, claim forms,
       and supporting documentation; and
      Reviewed HUD monitoring reports of servicer claims.
To achieve our objective, we relied in part on data obtained from HUD’s Single Family Housing
Enterprise Data Warehouse (SFHEDW) and HUD’s Yardi p260 Mortgage Compliance Monitor
information system (p260). SFHEDW contains information derived from SFDMS and the A43C
Claims system. The p260 system tracks properties after they have been conveyed and contains
data related to postconveyance repairs, inspections, appraisals, management fees, and selling
activities. We performed a minimal amount of testing and found the data to be adequate for our
purposes.
Using SFHEDW and p260, we identified 246,267 loans resulting in a conveyance of property to
HUD between April 2010 and April 2015. We selected a statistical sample of 90 loans to
represent our universe. We used p260 to obtain servicer-submitted claim forms, supporting
documentation, and HUD settlement statements for each loan in our sample. We obtained
monthly status reports for each loan that servicers submitted to SFHEDW. We reviewed this
information to identify the date on which the servicer should have initiated foreclosure, obtained
the property, and conveyed the property.
We relied on the accuracy of servicers’ self-reporting. HUD grants time extensions to servicers’
foreclosure deadlines for a number of reasons, including loss mitigation, bankruptcy, natural
disasters, and other circumstances outside the servicers’ control. We gave full credit under the
regulations for any claimed extensions, whether or not servicers properly obtained HUD
approval for them. We found inconsistencies in servicer reporting and relied on data from
servicers’ claim forms in these instances. We did not perform testing to verify the accuracy of
servicer-submitted dates, costs, or loss mitigation efforts in servicers’ claim forms.
We used the date on which the servicer should have conveyed the property to identify claimed
expenses occurring after this date. We statistically projected our results to our universe. We
projected the number of noncompliant loans in our sample to the universe and the total of HUD’s


                                                 14
payments in our sample to the universe. See appendix D for a detailed explanation of our sample
selection and results projection.
Our calculation of debenture interest was understated. We did not take into account debenture
interest received by the servicer when the borrower made sporadic payments after the date of
default. We gave the servicer credit during these months for interest due to it when the servicer
may have been sporadically collecting payments. Therefore, servicers, in some cases, received
even greater interest overpayments than shown by our calculations.
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.




                                                 15
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:

   Policies and procedures to reasonably ensure that servicers comply with Federal regulations
    for the timely foreclosure and conveyance of properties to HUD.
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:

   Program regulations do not establish a maximum period for filing a claim and do not limit
    holding costs when servicers do not meet all foreclosure and conveyance deadlines (finding).
   HUD monitored only a small percentage of servicers after the claim had been paid (finding).




                                                  16
Appendixes

Appendix A


                            Schedule of Questioned Costs
                       Recommendation      Unreasonable or
                           number           unnecessary 1/
                               1A             $2,238,721,464

                             Totals            2,238,721,464



1/   Unreasonable or unnecessary costs are those costs not generally recognized as ordinary,
     prudent, relevant, or necessary within established practices. Unreasonable costs exceed
     the costs that would be incurred by a prudent person in conducting a competitive
     business. We determined the unreasonable and unnecessary cost to be the payments
     made from the FHA insurance fund for costs incurred after the deadline to convey. We
     determined these payments to be an estimated $2.23 billion.




                                             17
Appendix B
             Auditee Comments and OIG’s Evaluation



Ref to OIG
Evaluation    Auditee Comments




Comment 1




                               18
Ref to OIG
Evaluation   Auditee Comments




                            19
Ref to OIG
Evaluation   Auditee Comments




Comment 2


Comment 3




Comment 4




Comment 5




                            20
                         OIG Evaluation of Auditee Comments


Comment 1   As requested, we have reviewed and reconsidered the estimated costs identified in
            this report. For the reasons stated in the comments below, we believe the
            estimates we used in the report are appropriate.
Comment 2   We removed the simple random sample size comparison paragraph in Appendix
            D from the report because it was not relevant to the stratified systematic sample
            used during our review. We used a precision of 0.223 throughout our calculations
            to arrive at the correct sample and projection of results. The removed paragraph
            contained “0.227” and “22.7 percent”, which were typographical errors. These
            figures were not part of our calculations.
Comment 3   We applied the regulations at 24 CFR 203.331 and Handbook 4330 chapter 2-2,
            as stated. Default date is the first uncorrected failure to perform any obligation
            under the mortgage and subsequent payments shall not change the mortgagee’s
            failure to comply with time requirements unless such payments are sufficient to
            cure the default. However, we agree with HUD that the results of using either
            method were reasonably comparable for our sample and the purposes of the audit
            objective.
Comment 4   HUD states that prior missed deadlines are not a factor in determining whether the
            property was conveyed within a reasonable amount of time under 24 CFR
            203.359(b)(1). We are aware of this (see page 7, last paragraph) and state in the
            report that current regulations are a primary cause for the report condition. We
            believe it is not productive or reasonable for HUD, the mortgage industry, or the
            public to allow servicers to delay finalizing foreclosure without any time
            limitation. The effect of this report states that while it may not have been
            ineligible under current regulations, it was not reasonable or necessary for
            servicers to submit and be reimbursed for costs incurred after the reasonable
            conveyance deadline.
Comment 5   We agree that some of the expenses that occurred after the appropriate
            conveyance date are expenses that would have needed to be incurred as part of a
            normal claims process. However, there is no way to determine after the fact how
            much, if any, of those expenses would have been incurred if the lender had met
            the deadline. In addition, periodic costs that increase as time passes, such as taxes
            and insurance, make up a significant percentage of the expenses incurred after
            conveyance deadlines for our sample. We gave the servicer full credit for
            periodic costs whenever the begin date of services rendered occurred before the
            reasonable conveyance date regardless of the end date. Given this, and our
            opinion that it is not reasonable or necessary for servicers to submit and be
            reimbursed for all costs incurred after the reasonable conveyance deadline, we
            believe the methods we used during our review resulted in the most reasonable
            estimate of the financial impact on the insurance fund. See the scope and
            methodology section and appendix D for more information on our methodology.


                                              21
Appendix C
                                             Criteria


Excerpts From 24 CFR Part 203

§ 203.331 Definition of default, date of default, and requirement of notice of default to HUD.
       (a) Default. If the mortgagor [borrower] fails to make any payment or to perform any
       other obligation under the mortgage, and such failure continues for a period of 30 days,
       the mortgage shall be considered in default for the purposes of this subpart.
       (b) Date of default. For the purposes of this subpart, the date of default shall be
       considered as 30 days after:
               (1) The first uncorrected failure to perform any obligation under the mortgage; or
               (2) The first failure to make a monthly payment that subsequent payments by the
               mortgagor are insufficient to cover when applied to the overdue monthly
               payments in the order in which they became due.
       (c) Notice of default. Once each month, on a day prescribed by HUD, the mortgagee
       [lender] shall report to HUD all mortgages that were in default on the last day of the
       month, or that were reported as in default the previous month. The report shall be made
       in a manner prescribed by HUD.
       (d) Number of days in month. For the purposes of this section, each month shall be
       considered to have 30 days.
§ 203.355 Acquisition of property.
       (a) In general. Upon default of a mortgage, except as provided in paragraphs (b) through
       (i) of this section, the mortgagee shall take one of the following actions within nine
       months from the date of default, or within any additional time approved by the [HUD]
       Secretary or authorized by §§ 203.345 or 203.346. For mortgages where the date of
       default is on or after February 1, 1998, the mortgagee shall take one or a combination of
       the following actions within six months of the date of default or within such additional
       time approved by HUD or authorized by §§ 203.345 or 203.346:
               (1) Obtain a deed-in-lieu of foreclosure;
               (2) Commence foreclosure;
       (b) Vacant or abandoned property. With respect to defaulted mortgages on vacant or
       abandoned property, if the mortgagee discovers, or should have discovered, that the
       property is vacant or abandoned, the mortgagee must commence foreclosure within the
       later of 120 days after the date the property became vacant, or 60 days after the date the



                                                 22
       property is discovered, or should have been discovered, to be vacant or abandoned; but
       no later than the number of months from the date of default as provided in paragraph (a)
       of this section. The mortgagee must not delay foreclosure on vacant or abandoned
       property because of the requirements of § 203.606.
§ 203.356 Notice of foreclosure and preforeclosure sale; reasonable diligence requirements.
        (b) Reasonable diligence. The mortgagee must exercise reasonable diligence in
       prosecuting the foreclosure proceedings to completion and in acquiring title to and
       possession of the property. A time frame that is determined by the Secretary to constitute
       “reasonable diligence” for each State is made available to mortgagees.
§ 203.359 Time of conveyance to the Secretary.
       (b) For mortgages insured under firm commitments issued on or after November 19,
       1992, or under direct endorsement processing where the credit worksheet was signed by
       the mortgagee’s underwriter on or after November 19, 1992 -
              (1) Conveyance by the mortgagee. The mortgagee must acquire good marketable
              title and transfer the property to the Secretary within 30 days of the later of:
                      (i) Filing for record the foreclosure deed;
                      (ii) Recording date of deed in lieu of foreclosure;
                      (iii) Acquiring possession of the property;
§ 203.402 Items included in payment – conveyed and non-conveyed properties.
       The insurance benefits paid in connection with foreclosed properties, whether or not
       conveyed to the The Secretary; and those properties conveyed to the Commissioner as a
       result of a deed in lieu of foreclosure; and those properties sold under an approved pre-
       foreclosure sale shall include the following items:
       (a) Taxes, ground rents, water rates, and utility charges that are liens prior to the
       mortgage.
       (b) Special assessments, which are noted on the application for insurance or which
       become liens after the insurance of the mortgage.
       (c) Hazard insurance premiums on the mortgaged property not in excess of a reasonable
       rate as defined in § 203.379(a)(4).
       (d) Periodic MIP or open-end insurance charges;
       (e) Taxes imposed upon any deeds or other instruments by which said property was
       acquired by the mortgagee and transferred or conveyed to the Commissioner, or was
       acquired by the mortgagee and retained pursuant to § 203.368;




                                                  23
(f) Foreclosure costs or costs of acquiring the property otherwise (including costs of
acquiring the property by the mortgagee and of conveying and evidencing title to the
property to HUD, but not including any costs borne by the mortgagee to correct title
defects) actually paid by the mortgagee and approved by HUD, in an amount not in
excess of two-thirds of such costs or $75, whichever is the greater. For mortgages
insured on or after February 1, 1998, the Secretary will reimburse a percentage of
foreclosure costs or costs of acquiring the property, which percentage shall be determined
in accordance with such conditions as the Secretary shall prescribe. Where the
foreclosure involves a mortgage sold by the Secretary on or after August 1, 1969, or a
mortgage executed in connection with the sale of property by the Secretary on or after
such date, the mortgagee shall be reimbursed (in addition to the amount determined under
the foregoing) for any extra costs incurred in the foreclosure as a result of a defect in the
mortgage instrument, or a defect in the mortgage transaction or a defect in title which
existed at or prior to the time the mortgage (or its assignment by the Secretary) was filed
for record, if the mortgagee establishes to the satisfaction of the Commissioner that such
extra costs are over and above those customarily incurred in the area.
(g)
       (1) For mortgages insured under firm commitments issued before November 19,
       1992, or under direct endorsement processing where the credit worksheet was
       signed by the mortgagee’s underwriter before November 19, 1992, reasonable
       payments made by the mortgagee, with the approval of the Secretary, for the
       purpose of protecting, operating, or preserving the property, or removing debris
       from the property.
       (2) For mortgages insured under firm commitments issued on or after November
       19, 1992, or under direct endorsement processing where the credit worksheet was
       signed by the mortgagee’s underwriter on or after November 19, 1992, reasonable
       payments made by the mortgagee, with the approval of the Secretary, for the
       purpose of protecting, operating, or preserving the property, or removing debris
       from the property prior to the time of conveyance required by § 203.359.
(k)
       (1) Except as provided in paragraphs (k)(1)(i) and (ii) of this section, for
       properties conveyed to the Secretary and endorsed for insurance on or before
       January 23, 2004, an amount equivalent to the debenture interest that would have
       been earned, as of the date such payment is made, on the portion of the insurance
       benefits paid in cash, if such portion had been paid in debentures, and for
       properties conveyed to the Secretary and endorsed for insurance after January 23,
       2004, debenture interest at the rate specified in § 203.405(b) from the date
       specified in § 203.410, as applicable, to the date of claim payment, on the portion
       of the insurance benefits paid in cash.
       (i) When the mortgagee fails to meet any one of the applicable requirements of §§
       203.355, 203.356(b), 203.359, 203.360, 203.365, 203.606(b)(l), or 203.366 within


                                          24
the specified time and in a manner satisfactory to the Secretary (or within such
further time as the Secretary may approve in writing), the interest allowance in
such cash payment shall be computed only to the date on which the particular
required action should have been taken or to which it was extended;
(ii) When the mortgagee fails to meet the requirements of § 203.356(a) within the
specified time and in a manner satisfactory to the Secretary (or within such further
time as the Secretary may specify in writing), the interest allowance in such cash
payment shall be computed to a date set administratively by the Secretary.




                                  25
Appendix D
                                    Sampling and Projections


FHA Loans – Delayed Conveyance – Universe and Sampling
Scope of Review
When FHA-insured mortgages go into default and the lender submits a claim to HUD, generally,
a claim is paid to the lender, and the property is conveyed via a transfer of title (or ownership) to
HUD. In some instances, the conveyance of the property to HUD is delayed. The purpose of the
statistical sampling in this review is to determine the number of loans in the universe confirmed
as a delayed conveyance and estimate the total dollars paid in ineligible holding costs from HUD
to lenders as a result of the delay.
Audit Universe
The audit universe consists of 246,267 loans that meet the following criteria that have an FHA
claim record populated in the P-260 Lender Portal System:
   1.   HUD acquired title to the property between April 2010 and April 2015.
   2.   OIG computed a delayed conveyance calculation of at least 3 months.
   3.   The cumulative holding cost claim amount paid was at least $5,000.
   4.   Loans that were a part of the Bank of America auction agreement were excluded.
Sample Frame
The audit universe.
Sampling Unit
Properties individually conveyed to HUD identified by FHA case number.
Sampling Unit Valuation
The total dollar amount of holding costs paid to the lender from HUD for each record identified
by the sampling unit.
Sample Selection Method
Sample design: stratified systematic sample - A stratified systematic sample of 90 records was
identified for review among the audit universe. A systematic approach was used to help control
for potential differences that may occur across sampling units by both State and different
monthly conveyance timeframes.
Taken in rank order by the size of the total holding costs amount, the strata were designed to
encompass the following ranges by percentile: 0-20, 20-40, 40-60, 60-80, 80-90, 90-95, and 95-
100th. After strata boundaries were determined, the data were sorted by State and then by the
monthly count of the timeframe from claim to conveyance within each stratum for the systematic
sample pull. The data were sampled using a computer program written in SAS®, using the
survey select procedure with a random-number seed value of 7. The table below lists the strata
boundaries and other key data related to this sample design.



                                                  26
                Form B           Universe        Sample       Probability of      Sampling
   Strata
                amount            count           count         selection          weight
   0-20pct         >0             49,245           18            0.0004            2735.83
  20-40pct      ≥ $8746           49,253           18            0.0004            2736.28
  40-60pct      ≥ $11492          49,260           18            0.0004            2736.67
  60-80pct      ≥ $14766          49,251           18            0.0004            2736.17
  80-90pct      ≥ $19832          24,634            9            0.0004            2737.11
  90-95pct      ≥ $24878          12,310            4            0.0003            3077.50
 95-100pct      ≥ $30198          12,314            5            0.0004            2462.80
    Total         N/A            246,267            90            N/A                N/A

Sample size calculations: We found a sample size of 90 to be the best size for providing
meaningful audit results. With the frequent occurrence of null values in reviews, possible
findings follow a lognormal distribution, which approximates a bell curve. Given this feature of
the data, we modeled the actual levels of accuracy achieved at different levels of error and
observed the sample sizes, which yielded an accuracy better than or equal to a one-sided 95
percent confidence interval without unnecessary risk of a spurious error in our projections. To
perform this modeling, we used replicated sampling to proof-test the sample design and model
the true sampling distribution, thereby confirming that traditional statistical formulas achieve the
expected results.
To model the behavior and accuracy of possible audit findings, we used the universe of 246,267
FHA case numbers. We modeled circumstances in which the likelihood of error ranged from 15
through 90 percent with 15 percent interval steps, the error amounts being a randomized portion
between 50 and 100 percent of the holding costs paid to the lender by HUD. After modeling
using our computer-replicated simulations in SAS®, we determined that a stratified sample size
of 90 consistently yielded accurate results and confidence intervals. In some audit universes, as
the error rate approaches high levels (as in this case, upward to 90 percent), the lognormal
tendency of sampling distributions can be pronounced enough that a slightly increased t-score
can be required to meet the specified confidence interval. In this case, the review results dictate
whether we will have to increase the t-score used in projecting results to meet the stated one-
sided confidence interval of 95 percent. This adjustment will be addressed after the review
results have been studied and if necessary, will be made in calculating the projections.


Findings:
Based on a stratified systematic sample of 90 loan records designed to minimize error, we can
say the following statements:
Dollar Projection Results Part A:
We found that in 25 out of 90 loan records reviewed, HUD unreasonably and unnecessarily
overpaid Part A interest. This amounts to a weighted average of $1,116.72 per loan. Deducting
the statistical margin of error to accommodate for the uncertainties inherent in statistical
sampling, we can still say – with a one-sided confidence interval of 95 percent– that this amounts


                                                  27
to at least $576.39 in Part A interest overpayments per loan, and it could be more. In the context
of the total universe of 246,267 loan records, this amounts to a total loss to HUD in Part A
interest overpayments of at least $141.9 million, and it could be more.
Dollar Projection Results Part B:
We found that in 85 out of 90 loan records reviewed, HUD unreasonably and unnecessarily
overpaid Part B claims. This amounts to a weighted average of $9,545.96 per loan. Deducting
the statistical margin of error to accommodate for the uncertainties inherent in statistical
sampling, we can still say – with a one-sided confidence interval of 95 percent– that this amounts
to at least $8,514.24 in Part B overpayments per loan, and it could be more. In the context of the
total universe of 246,267 loan records, this amounts to a total loss to HUD in Part B
overpayments of at least $2.096 billion, and it could be more.
Missed a Foreclosure Deadline, a Conveyance Deadline, or Both:
We found that in 89 out of 90 loan records reviewed, servicers missed a foreclosure deadline, a
conveyance deadline, or both. This amounts to a weighted average of 98.8 percent of the loans.
Deducting the statistical margin of error to accommodate for the uncertainties inherent in
statistical sampling, we can still say – with a one-sided confidence interval of 95 percent– that
this amounts to at least 97.0 percent of the loans in the universe met this criteria. Extending this
percent to the total universe count of 246,267 loan records we can say, a servicer either missed a
foreclosure deadline, a conveyance deadline, or both on at least 238,978 loans, and it could be
more.
Percent/Count Projection Results Part A:
We found that in 25 out of 90 loan records reviewed, HUD unreasonably and unnecessarily
overpaid Part A interest. This amounts to a weighted average of 27.9 percent of the loans.
Deducting the statistical margin of error to accommodate for the uncertainties inherent in
statistical sampling, we can still say – with a one-sided confidence interval of 95 percent– that
this amounts to at least 20.1 percent of the loans in the universe have this same characteristic.
Extending this percent to the total universe count of 246,267 loan records we can say, HUD
unreasonably and unnecessarily overpaid Part A interest on at least 49,532 loans, and it could be
more.
Percent/Count Projection Results Part B:
We found that in 85 out of 90 loan records reviewed, HUD unreasonably and unnecessarily
overpaid Part B claims. This amounts to a weighted average of 94.4 percent of the loans.
Deducting the statistical margin of error to accommodate for the uncertainties inherent in
statistical sampling, we can still say – with a one-sided confidence interval of 95 percent– that this
amounts to at least 90.4 percent of the loans in the universe have this same characteristic.
Extending this percent to the total universe count of 246,267 loan records we can say, HUD
unreasonably and unnecessarily overpaid Part B claims on at least 222,652 loans, and it could be
more.




                                                  28
Appendix E
                                      Missed Deadlines


For each loan reviewed in our sample, the following table shows the number of days by which
servicers missed their deadlines to initiate foreclosure, finalize foreclosure and secure the
properties, and convey the properties to HUD.

                                    Days late to    Days late to     Days late to
             Case Number              initiate       complete          convey
                                    foreclosure     foreclosure       property
             011-6635466                    584            600              700
             022-1855978                       0              0               93
             022-1920493                       0           116              307
             023-2854902                   1061           1044             1042
             031-2313880                   1862           1779             1896
             045-6486640                    554            478              478
             052-3053287                       0              0                0
             052-4279802                   1102            988             1033
             052-5053664                       0              0               11
             052-5264340                    993            844              849
             061-3533037                       0           806              882
             071-0984303                       0           596              657
             093-5921741                       5           478              701
             093-5983411                       0           763              731
             095-0671914                     80           1112             1345
             095-0824712                       0           128              158
             105-0754493                    193            180              315
             105-1472137                    826            754              749
             105-2405326                    430            354              383
             105-2440357                     69              85             105
             105-3358540                     22               0                3
             105-3579848                    618            574              557
             105-5117320                    161               0             324
             132-1478976                       0           183              384
             132-1661704                     20            106              104
             137-2046251                     92              37             200
             137-3609714                       0           714              710
             137-3623404                    196            754              752
             137-4171584                     22               9               11
             137-5219943                       0           545              523
             151-6624311                   1808           1666             1669



                                               29
              Days late to   Days late to   Days late to
Case Number     initiate      complete        convey
              foreclosure    foreclosure     property
151-8262614              0          152            304
181-2039418              0          277            274
181-2060853           102           912            870
201-3490739              0             0           325
201-4290575           183           355            354
221-3355292            83           149            211
241-7332560           554           787            768
251-3208785           399           309               5
261-8030525            11              0              0
261-8874989              0            68             78
261-8912775           216              0           183
262-1505614            10              0           106
263-4056024           396           519            626
263-4349019              0             0           340
263-4402059              0          126            394
271-9186554              0             0           987
271-9294551           203              0           272
292-4897461            47              0              5
292-5423222           207           144            142
292-5500983           247             95           343
321-2475043              0             0           131
331-1136928            32             28              5
332-4489323              0             0           643
351-3581829           125           577            574
381-5129263              0             0             12
381-8857043           203           796            792
387-0125716           559           789            790
387-0552931              0          245            257
411-3862723           794          1163           1140
412-4320775           731           704            712
412-5920827              0             0           178
413-4658079           512           546            565
413-5217728              0             0             47
421-3979411              0          856            851
422-2659258              0             0           217
441-5840528              0         1140           1143
441-7874156           129           866           1237
461-3972453           926          1611           1608
481-3387699              0            74             71



                        30
                                     Days late to     Days late to     Days late to
              Case Number              initiate        complete          convey
                                     foreclosure      foreclosure       property
              483-3678513                   1286            1463             1426
              483-4113292                    147             109              107
              491-7936974                       0               0               51
              491-7967023                    126               62               61
              491-8650169                       0            105              147
              492-7949629                    423             383              382
              492-8145083                    132                0               77
              495-7108299                   1046            1005             1005
              495-7253384                    316             164              293
              495-7708271                    473             416              406
              501-6820098                       0            293              659
              501-7536091                    536             662              920
              541-7808291                     11                0                0
              541-8020204                    425             316              337
              541-8243770                    263               79             112
              561-8979743                    815             774             1042
              581-2411096                     85             172              299
              581-2532993                       0            304              325
              581-2594004                       0            138              130
              581-3235147                       0            143              176
              Loans that missed
                                               56              68               87
              the deadline
              Average days late
              for those loans that           419              523              496
              missed the deadline


These values identify the servicer’s lateness at three points in time during the foreclosure and
conveyance process. This process is sequential, so when a servicer misses a foreclosure
deadline, that lateness is incorporated into the lateness of the missed conveyance deadline as
well. For example, if the servicer was 140 days late to finalize foreclosure of a property and 150
days late to convey it, that means the conveyance process took 10 days longer than it should
have.




                                                 31