oversight

HUD Did Not Have Adequate Controls To Ensure That Partial Claim Notes for FHA Loans Were Properly Tracked for Future Collection

Published by the Department of Housing and Urban Development, Office of Inspector General on 2018-09-21.

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

       Office of Single Family Housing,
               Washington, DC
  HUD’s Tracking of Partial Claim Notes for FHA Loans




Office of Audit, Region 9    Audit Report Number: 2018-LA-0005
Los Angeles, CA                              September 21, 2018
To:            Gisele G. Roget
               Deputy Assistant Secretary for Single Family Housing, HU

               //SIGNED//
From:          Tanya E. Schulze, Regional Inspector General for Audit, 9DGA

Subject:       HUD Did Not Have Adequate Controls To Ensure That Partial Claim Notes for
               FHA Loans Were Properly Tracked for Future Collection


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 tracking of partial claim notes.

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 website. 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
213-534-2471.
                    Audit Report Number: 2018-LA-0005
                    Date: September 21, 2018

                    HUD Did Not Have Adequate Controls To Ensure That Partial Claim Notes
                    for FHA Loans Were Properly Tracked for Future Collection



Highlights
What We Audited and Why
We audited the U.S. Department of Housing and Urban Development’s (HUD) tracking of
partial claim notes. The audit was initiated in response to an Office of Inspector General
preaudit analysis of HUD’s Single Family Data Warehouse (SFDW) data, which determined that
partial claim notes may not have been properly tracked in HUD’s Single Family Mortgage Asset
Recovery Technology (SMART) system (see Scope & Methodology section for description of
HUD systems). Our audit objective was to determine whether HUD had adequate controls to
ensure that partial claim notes were properly tracked for future collection.


What We Found
HUD’s National Servicing Center (NSC) did not have adequate controls to ensure that partial
claim notes were properly tracked for future collection, putting the collectability of $6 million in
partial claim notes at risk. More specifically, NSC did not always enter partial claim notes and
lender payments into its tracking system and ensure that note and mortgage documents
adequately supported the partial claim notes. From January 1, 2013, to August 31, 2017, HUD’s
SFDW showed that there were 407,984 partial claims. A review of 695 nonstatistically sampled
Federal Housing Administration loans with partial claims paid during the period January 1, 2013,
to August 31, 2017, found 421 deficiencies in boarding (entering partial claims) and 394
deficiencies in tracking partial claim notes. This condition occurred because of NSC’s reliance
on manual processes, which were inadequate to ensure that all partial claims paid and lender
payments received were accurately captured in its SMART tracking system. In addition to the
risk of partial claim collectability, HUD could be misreporting partial claim note balances.

What We Recommend
We recommend that HUD (1) enter more than $3 million in partial claims that were not in
SMART; (2) remove $697,354 in duplicate partial claim note entries in SMART; (3) obtain
missing documents for partial claims totaling $644,767; (4) enter more than $1.0 million in
lender payments received that were not in SMART; (5) request that lenders rerecord mortgage
documents for 18 inappropriately released loans totaling $451,000; (6) review 4 loans, totaling
$93,409 in partial claim notes and remove those in which HUD has not paid a partial claim; (7)
develop procedures and controls to enter all partial claims paid and lender payments received; (8)
develop controls to ensure that note and mortgage documents accepted are accurate and entered
into SMART; and (9) develop and implement controls to ensure that mortgages are released only
when they have been satisfied.
Table of Contents

Background and Objective......................................................................................3

Results of Audit ........................................................................................................4
         Finding: HUD Did Not Have Adequate Controls To Ensure That Partial Claim
         Notes Were Properly Tracked for Future Collection .................................................... 4

Scope and Methodology .........................................................................................10

Internal Controls ....................................................................................................12

Appendixes ..............................................................................................................13
         A. Schedule of Questioned Costs and Funds To Be Put to Better Use ...................... 13
         B. Auditee Comments and OIG’s Evaluation ............................................................. 14
         C. Criteria ....................................................................................................................... 18
         D. Schedule of Boarding and Tracking Deficiencies .................................................. 19




                                                                     2
Background and Objective
The U.S. Department of Housing and Urban Development’s (HUD) Federal Housing
Administration (FHA), created by Congress in 1934, provides mortgage insurance on loans made
by FHA-approved lenders. Under the FHA program, lenders bear less risk because FHA will
pay a claim to the lender in the event of a homeowner’s default; however, loans must meet
certain requirements established by FHA to qualify for insurance. Through its National
Servicing Center (NSC), FHA offers loss mitigation programs to help FHA-insured homeowners
facing financial hardship and whose mortgage is either in default or at risk of default.

The partial claim option is a loss mitigation tool that allows lenders to advance funds on behalf
of a borrower to reinstate a delinquent FHA-insured mortgage. The partial claim defers the
repayment of mortgage principal through an interest-free subordinate mortgage that is not due
until the first mortgage is paid off.

NSC, within the Office of Single Family Housing, through its contractor, is responsible for
servicing these partial claim mortgages. NSC uses the Single Family Mortgage Asset Recovery
Technology (SMART) to track partial claim loans. The SMART system is used for accounting-
level detail on forward and subordinate mortgages, including its case-tracking ability; report-
generating capability; query functions; and database management, analyzing, processing, and
tracking of FHA-insured and HUD Secretary-held first, second, and subordinate note and
mortgage loan-servicing functions. It is used to provide servicing to 10 different types of loans,
including partial claims. From January 1, 2013, to August 31, 2017, HUD paid $11.7 billion in
partial claims.

Partial claim data from HUD’s Single Family Claims Subsystem1 are automatically boarded2 into
the SMART system. The system will reject the boarding of a partial claim if there is already a
partial claim open in SMART for the corresponding FHA case number. In these cases, a
validation is made to confirm that a multiple claim payment was made, causing a second, third,
or possible fourth partial claim to be manually boarded into SMART. When the recorded
mortgage and note documents are received, they are scanned and entered into SMART.

Our audit objective was to determine whether HUD had adequate controls to ensure that partial
claim notes were properly tracked for future collection.




1
    The Single Family Insurance System – Claim Subsystem processes single-family insurance claims against
    defaulted loans.
2
    Boarding, a term used by NSC, means entering a partial claim note into its SMART tracking system.



                                                       3
Results of Audit
Finding: HUD Did Not Have Adequate Controls To Ensure That
Partial Claim Notes Were Properly Tracked for Future Collection
HUD’s NSC did not have adequate controls to ensure that partial claim notes were properly
tracked for future collection. Our review of 695 nonstatistically sampled FHA loans with partial
claims paid during the period January 1, 2013, to August 31, 2017, identified 421 boarding
deficiencies and 394 tracking deficiencies. This condition occurred because of NSC’s reliance
on manual processes, which were inadequate to ensure that all partial claims paid and subsequent
activities were accurately captured in its tracking system. The inadequate controls put the
collectability of $6 million in partial claim notes at risk, and HUD could be overstating and
understating its partial claim notes.

Partial Claim Notes With Boarding Deficiencies
NSC had inadequate controls over its boarding process to ensure that all partial claim notes were
entered into SMART. Our review of 695 nonstatistically sampled FHA loans with partial claims
paid during the period January 1, 2013, to August 31, 2017, identified the following 421
boarding deficiencies:

                                   Table 1 – Loans with boarding deficiencies

                   47     Partial claims were not boarded.
                  350     Manual partial claims were not boarded.
                   24     Partial claims were boarded twice, creating duplicate entries.

Most partial claim notes were automatically entered into SMART. However, NSC required a
manual boarding process when an FHA loan had more than one partial claim paid. As a result,
our audit identified $716,061 in partial claim notes that were not boarded for 47 loans3 because
of errors made during the manual boarding process.

Partial claims that were manually paid by HUD’s Single Family Claims Branch also required a
manual boarding process. Although NSC received reports of manually paid partial claims from
the Claims Branch, it chose not to board these manually paid partial claims into SMART due to
discrepancies in the partial claim note amounts received from the Claims Branch. Therefore,
nearly $2.3 million in partial claim notes that were manually paid for 350 loans4 were not
boarded into SMART.



3
    See appendix D, column “Partial claim not boarded,” for specific loan details.
4
    See appendix D, column “Manual partial claim not boarded,” for specific loan details.



                                                         4
In addition, partial claims were boarded into SMART twice. Duplicates were boarded because
NSC entered partial claims that were processed and then reentered the same partial claim when
disbursed. Our audit identified 24 loans5 with $697,354 in duplicate partial claim note entries in
SMART.6 Even though the partial claims were not paid twice, this duplicate boarding issue
effectively overstated partial claim balances. According to NSC, this boarding issue was
corrected in 2017.

Partial Claim Notes With Tracking Deficiencies
NSC lacked adequate controls to ensure that partial claim notes were properly tracked for future
collection. Based on our review of 695 nonstatistically sampled FHA loans with partial claims
paid during the period January 1, 2013, to August 31, 2017, we identified the following 394
tracking deficiencies:

                                   Table 2 – Loans with tracking deficiencies

                    The mortgage document was missing or not recorded at the county
             33
                    recorder’s office.
             40     The note document was missing.
                    The partial claim payment was canceled but was not removed from
            156
                    SMART.
            139     A lender payment was received but was not recorded in SMART.
             18     The mortgage was inappropriately released.
                    A partial claim note was entered into SMART but was not paid by
              4
                    HUD.
              1     A transaction was entered into SMART in error.
              1     NSC did not collect on the partial claim note after the loan matured.
                    The partial claim note amount entered into SMART was different
              2
                    from the amount on the note or mortgage amount.

Missing Note and Mortgage Documents
According to HUD Handbook 4000.1, FHA Single Family Housing Policy Handbook,7 lenders
are required to deliver to HUD’s servicing contractor (1) the original partial claim promissory
note no later than 60 days from the execution date and (2) the recorded subordinate mortgage no
later than 6 months from the execution date. However, there were at least 33 loans8 in which the
mortgage document was missing or did not indicate that it had been recorded at the appropriate
county recorder’s office and at least 40 loans9 in which the note document was missing. This


5
    See appendix D, column “Partial claim boarded twice,” for specific loan details.
6
    As part of its comments, appendix B, HUD provided support for the statement that 24 duplicate entries were
    removed from SMART. The supporting documents will be reviewed during audit resolution.
7
    See appendix C.
8
    See appendix D, column “Mortgage missing or unrecorded,” for specific loan details.
9
    See appendix D, column “Note missing,” for specific loan details.



                                                        5
condition occurred because NSC relied on the servicing contractor to notate in SMART the
receipt of the note and mortgage documents. There were instances in which SMART indicated
that the documents had been received, but the documents were missing from SMART. Without
these documents, the collectability of $644,767 in partial claim notes was put at risk. We
identified an additional 252 loans that we did not verify whether the note and mortgage
documents were entered into SMART or whether the mortgage was recorded at the county’s
office. HUD should review these additional loans to determine whether it had obtained the
corresponding note and recorded mortgage documents.10

Canceled Partial Claim Payments Not Removed and Lender Payments Received Not
Recorded
Although NSC received a monthly report of canceled partial claim payments, canceled payments
for 156 loans11 were not removed from SMART. In addition, NSC was not aware of the lender
payments received for 139 loans.12 When NSC was aware of the lender payments received, they
were not recorded in a timely manner. Therefore, the balances owed on the partial claim notes
shown in SMART were not always accurate.13 In some cases, the servicing contractor noted in
SMART that lenders submitted payments via Pay.gov14 and that internal fund transfers were in
pending status for months. However, the lender payments were not recorded as received;
therefore, the balances were overstated by more than $1.0 million.

Inappropriate Mortgage Releases
NSC lacked adequate controls to verify the status of partial claim notes before approving
mortgage releases. There were 18 loans15 in which the servicing contractor incorrectly noted that
the partial claim was not paid by HUD so NSC approved the mortgage release. These errors put
HUD’s collectability of $451,000 in partial claim mortgages at risk because the mortgages
securing HUD’s interests were released.

Other Tracking Deficiencies
In addition to the deficiencies identified above, eight loans16 had other tracking deficiencies that
impacted HUD’s collectability of the partial claim notes. These other tracking deficiencies
identified include the following:




10
     See FHA cases labeled with “DNV” in appendix D.
11
     See appendix D, column “Partial claim payment canceled but not removed,” for specific loan details.
12
     See appendix D, column “Lender payments not entered,” for specific loan details.
13
     For the 156 loans, partial claim payments that were canceled were typically reissued by manual payment. When
     NSC neglected to remove the canceled payment and enter the manual payment, the effects canceled each other
     out.
14
     Pay.gov is a claim remittance process by which lenders returned claim payments to HUD.
15
     See appendix D, column “Inappropriate mortgage release,” for specific loan details.
16
     See appendix D, columns “Partial claim entered but not paid by HUD,” “Partial claim note not collected after
     loan matured,” “Amount entered different from note or mortgage,” and “Entry in SMART made in error,” for
     specific loan details.



                                                        6
                                 Table 3 – Loans with other tracking deficiencies

                       A partial claim note was manually entered into SMART, but it was
                4      not paid by HUD, causing the balances to be overstated by
                       $93,409.
                       A transaction removing a partial claim note was entered into
                1      SMART by error, causing the balances to be understated by
                       $63,591.
                       NSC did not collect on the $1,905 partial claim note after the FHA
                1
                       loan matured.
                       The partial claim note amounts boarded into SMART were
                2      different from the amount on the note or mortgage document,
                       causing the balances to be understated by $622.

Conclusion
Because of NSC’s reliance on manual processes and inadequate controls, partial claim notes
were not always properly tracked for future collection. NSC did not always board partial claim
notes into its tracking system, and those that were boarded into the system were not always
tracked properly. A review of 695 nonstatistically sampled FHA loans with partial claims paid
identified 421 boarding deficiencies and 394 tracking deficiencies. These deficiencies put the
collectability of $6 million in partial claim notes at risk.

Recommendations
We recommend that the Deputy Assistant Secretary for Single Family Housing

1A.       Board 47 partial claim notes that were not boarded into SMART, resulting in funds to be
          put to better use in the amount of $716,061.17

1B.       Coordinate with the Deputy Assistant Secretary for Finance and Budget to board 350
          manually paid partial claims that were not boarded into SMART, resulting in funds to be
          put to better use in the amount of $2,297,706.18

1C.       Remove 24 duplicate partial claim note entries from SMART, resulting in funds to be put
          to better use in the amount of $697,354.19

1D.       Obtain the missing mortgage documents for 33 loans and the missing note documents for
          40 loans, totaling $644,767 in partial claim notes, and require any unrecorded mortgage
          documents to be recorded at the appropriate county’s office to ensure that HUD’s



17
     See appendix D, column “Partial claim not boarded,” for specific loan details.
18
     See appendix D, column “Manual partial claim not boarded,” for specific loan details.
19
     See appendix D, column “Partial claim boarded twice,” for specific loan details.



                                                          7
           interests are protected.20 For any missing documents that cannot be obtained, the Deputy
           Assistant Secretary should require the lender to reimburse HUD for the partial claim note.

1E.        Review 249 loans labeled with “DNV”21 in appendix D to identify any missing note or
           mortgage documents for the partial claims. For loans identified with missing documents,
           the Deputy Assistant Secretary should obtain the documents or require the lender to
           reimburse HUD for the partial claim note. For loans identified with unrecorded mortgage
           documents, the Deputy Assistant Secretary should require them to be recorded at the
           county’s office to ensure that HUD’s interests are protected.

1F.        Coordinate with the Deputy Assistant Secretary for Finance and Budget to record lender
           payments to update the balances for 139 loans in SMART, resulting in funds to be put to
           better use in the amount of $1,055,113.22

1G.        Rerecord the mortgage documents at the respective counties’ offices for 18 loans for
           which the partial claim mortgages were inappropriately released, resulting in funds to be
           put to better use in the amount of $451,000.23

1H.        Review four loans with partial claim notes already recorded in SMART and remove those
           loans in which HUD has not paid a partial claim, resulting in funds to be put to better use
           in the amount of $93,409.24

1I.        Reverse the transaction for one loan for which the transaction removing a partial claim
           note was made in error, resulting in funds to be put to better use in the amount of
           $63,591.25

1J.        Collect on one partial claim note for which the loan had matured, resulting in funds to be
           put to better use in the amount of $1,905.26

1K.        Review two loans in which the partial claim note amount entered was different from the
           note or mortgage amount to ensure that the appropriate partial claim note amount is
           entered into SMART, resulting in funds to be put to better use in the amount of $622.27

1L.        Update its procedures to allow automatic boarding for all partial claims paid to eliminate
           errors caused by manual boarding, including partial claim notes not boarded, and partial
           claim notes boarded but not yet paid by HUD.


20
      See appendix D, columns “Mortgage missing or unrecorded” and “”Note missing,” for specific loan details.
21
      Did not verify (DNV) – We did not verify whether the document was entered into SMART or whether it was
      recorded at the county’s office.
22
      See appendix D, column “Lender payments note entered,” for specific loan details.
23
      See appendix D, column “Inappropriate mortgage release,” for specific loan details.
24
      See appendix D, column “Partial claim entered but not paid by HUD,” for specific loan details.
25
      See appendix D, column “Entry in SMART made in error,” for specific loan details.
26
      See appendix D, column “Partial claim note not collected after loan matured,” for specific loan details.
27
      See appendix D, column “Amount entered different from note or mortgage,” for specific loan details.



                                                         8
1M.   Develop and implement procedures and controls to board all manually paid partial claims
      and record all lender payments received via claim remittances.

1N.   Develop and implement additional controls to ensure that it accepts only note and
      mortgage documents with correct amounts that could be matched to the amount recorded
      in SMART and that the note and mortgage documents marked as received are entered
      into SMART.

1O.   Develop and implement additional controls to ensure that it releases mortgages only
      when they have been satisfied.




                                              9
Scope and Methodology
We performed our audit fieldwork from October 2017 to June 2018 remotely at the Office of
Inspector General (OIG), Office of Audit, in Phoenix, AZ, and San Francisco, CA. Our audit
period covered partial claims paid on FHA-insured single-family loans from January 1, 2013, to
August 31, 2017.

To accomplish our objective, we

     •    Reviewed applicable HUD requirements (mortgagee letters and HUD Handbooks),
          internal policies, and procedures;

     •    Interviewed appropriate HUD personnel from the Office of Single Family Housing;

     •    Reviewed claim payment data from HUD’s Single Family Data Warehouse28 (SFDW)
          and Neighborhood Watch; 29

     •    Reviewed partial claim note data and source documentation from SMART;

     •    Reviewed claim remittance transactions from HUD’s Single Family Insurance System –
          Claim Subsystem (A43C);30

     •    Reviewed manual claim payment data from the HUD Single Family Claims Branch’s
          Access database;31 and

     •    Selected a nonstatistical sample of 695 FHA loans with partial claims paid.

We used data from SFDW and the Claims Branch’s Access database to identify the audit
universe. The audit universe included all partial claims paid on FHA-insured single-family loans
from January 1, 2013, to August 31, 2017. The final audit universe consisted of 408,401 partial
claims paid that totaled $11.7 billion.32




28
     The Single Family Data Warehouse is a large collection of database tables dedicated to support analysis,
     verification, and publication of FHA single-family data.
29
     Neighborhood Watch is a secure web-based application designed to provide comprehensive data querying,
     reporting and analysis capabilities for tracking the performance of loans originated, underwritten, and serviced
     by FHA-approved lenders.
30
     The Single Family Insurance System – Claim Subsystem processes single-family insurance claims against
     defaulted loans.
31
     HUD Single Family Claims Branch’s Access databases maintains the manual claims that cannot be processed by
     the Single Family Insurance System – Claim Subsystem.
32
     From SFDW, there were 407,984 partial claim loans with payments that totaled $11.7 billion. From the Access
     database, there were 417 partial claim loans with payments that totaled $10.3 million.



                                                         10
Although we did not perform a detailed assessment of the reliability of the data, we determined
that the data were sufficiently reliable for the purposes of our review because the data in the
sampled items were supported by documentation supplied by NSC or the Claims Branch.

We identified a nonstatistical sample of 695 FHA loans with more than $17.2 million in partial
claims paid for the audit. The sample was selected based on

   •   Indications of tracking issues, including (1) incorrect unpaid principal balances, (2)
       duplicate partial claims, (3) loans with missing documents, and (4) notes in SMART
       indicated that payments were received through Pay.gov but were not entered in SMART,
   •   FHA case numbers not in SMART,
   •   Understated unpaid principal balances,
   •   Overstated unpaid principal balances, and
   •   Manually paid partial claims.

This sampling method did not allow us to make a projection to the universe, but it was sufficient
to meet the audit objective.

We reviewed the nonstatistical sample to determine whether HUD properly tracked partial claim
notes for collection. For each sampled FHA loan with a partial claim, we reviewed, as
applicable, the

   •   Neighborhood Watch case details,
   •   Manual partial claim payment records,
   •   Lender claim remittance records, and
   •   SMART notes and transaction records.

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.




                                               11
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 HUD properly tracks partial claim notes for future collection.

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 Deficiency
Based on our review, we believe that the following item is a significant deficiency:

•   HUD did not have adequate controls to ensure that partial claim notes were properly tracked
    for future collection (finding).




                                                  12
Appendixes

Appendix A
           Schedule of Questioned Costs and Funds To Be Put to Better Use

                Recommendation                              Funds to be put
                                       Unsupported 1/
                    number                                  to better use 2/
                      1A                                         $716,061
                      1B                                        2,297,706
                      1C                                          697,354
                      1D                    $644,767
                      1F                                         1,055,113
                      1G                                           451,000
                      1H                                            93,409
                       1I                                           63,591
                      1J                                             1,905
                      1K                                               622
                     Totals                  644,767             5,376,761


1/   Unsupported costs are those costs charged to a HUD-financed or HUD-insured program
     or activity when we cannot determine eligibility at the time of the audit. Unsupported
     costs require a decision by HUD program officials. This decision, in addition to
     obtaining supporting documentation, might involve a legal interpretation or clarification
     of departmental policies and procedures. In this instance, the unsupported costs
     associated with recommendation 1D represent the missing mortgage documents for 33
     loans and the missing note documents for 40 loans totaling $644,767 in partial claim
     notes.

2/   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, implementation of recommendations 1A, 1B, 1C, 1F, 1G, 1H, 1I, 1J, and 1K
     will reduce the risk that partial claims could be not tracked, overstated, or understated and
     will ensure that partial claims are properly tracked for future collection. See appendix D
     for specific deficiencies identified for each loan.




                                              13
Appendix B
             Auditee Comments and OIG’s Evaluation




Ref to OIG    Auditee Comments
Evaluation




Comment 1




Comment 2




                              14
Ref to OIG
Evaluation



Comment 3



Comment 4
Comment 5



Comment 6



Comment 7
Comment 8


Comment 9


Comment 1




             15
                         OIG Evaluation of Auditee Comments

Comment 1   We appreciate HUD taking the time to review and respond to the audit report.
            Attachments A and B were not attached due to the presence of personally
            identifiable information and OIG’s agreement that HUD had corrected the issue
            related to duplicate partial claim note entries, respectively. The attachments can
            be made available upon request.

            The audit report was revised or clarified as noted in the proceeding comments
            based on information provided by HUD. However, the recommendations
            remained largely unchanged and the internal control deficiency is still categorized
            as a significant deficiency.

Comment 2   HUD suggested removal of the funds to be put to better use for recommendations
            1A and 1B because the partial claims, although not boarded into SMART, were
            legitimate payments. We agree the partial claims were legitimate payments to the
            lenders. However, as stated in the audit report, the review determined partial
            claims paid were not boarded into SMART. Therefore, partial claim balances
            were understated putting the collectability of these partial claim notes at risk.

            Recommendations that funds be put to better use are explained in appendix A. In
            this instance, implementation of recommendations 1A and 1B will reduce the risk
            that partial claims could be understated and will ensure that partial claims are
            properly tracked for future collection. The recommendations remain unchanged.

Comment 3   We agree with HUD’s statement that the partial claim payments were not
            duplicated. Although not paid twice, the audit determined that partial claims paid
            were boarded into SMART twice, effectively overstating the partial claim
            balances. Language was added to the report finding to provide clarification.

            We determined the documents provided by HUD do support the statement that the
            24 duplicate entries were removed from SMART. The documents will be used
            during audit resolution to appropriately close the recommendation.
            Recommendations that funds be put to better use are explained in appendix A. In
            this instance, implementation of recommendation 1C will reduce the risk that
            partial claims could be overstated and will ensure that partial claims are properly
            tracked for future collection. The recommendation remains unchanged.

Comment 4   We disagree with HUD’s suggestion that recommendations 1D and 1E be
            removed from the audit report. HUD did not provide additional documents with
            its response to support its statement that the mortgage and note documents were
            received or the lenders were billed prior to the audit. The recommendations
            remain unchanged.




                                             16
Comment 5   We disagree with HUD’s request to remove recommendation 1E. However, we
            agree that there appeared to be an assumption with the way the recommendation
            was worded. The audit did not determine whether the 249 loans labeled with
            “DNV” were missing note or mortgage documents. The recommendation was
            based on the finding that loans were missing note and mortgage documents.
            However, we did not verify the status of the documents for the 249 loans. We
            rephrased recommendation 1E to clarify that we recommend HUD verify the
            presence of these documents.

Comment 6   HUD stated the funds to be put to better use is not accurate because the partial
            claims were legitimate payments. Recommendations that funds be put to better
            use are explained in appendix A. In this instance, implementation of
            recommendation 1F will reduce the risk that partial claims could be overstated
            and will ensure that partial claims are properly tracked for future collection. The
            recommendation remains unchanged. Single Family Housing should provide
            support obtained from the Office of Finance and Budget through the audit
            resolution.

Comment 7   We acknowledge HUD’s statement that it has updated procedures and
            programming in April 2018. However, additional documents were not provided
            with the response to support that it updated procedures and programming in
            SMART. HUD should submit all supporting documents as part of the audit
            resolution.

Comment 8   The audit report acknowledged that, according to the NSC, the boarding issue
            related to duplicate entries in SMART was corrected in 2017 (see page 5, last
            sentence of section “Partial Claim Notes With Boarding Deficiencies”). We
            revised recommendation 1L regarding updating procedures to eliminate errors
            caused by duplicate entries.

Comment 9   HUD stated it has a process in place, documented in the Secretary Held Servicing
            Guide, to verify that only acceptable notes and mortgages are accepted in
            SMART. However, the Secretary Held Servicing Guide was not provided with
            the response. HUD should submit all supporting documents as part of the audit
            resolution.




                                             17
Appendix C
                                            Criteria

Title 24 CFR (Code of Federal Regulations) 203.371 provides information on partial claims.
It states:

   •   The mortgagee [lender] shall provide HUD with the original credit instrument no later
       than 60 days after execution.

   •   The mortgagee shall provide HUD with the original security instrument no later than 6
       months following the date of execution.

   •   If the mortgagee does not provide the original note and security instrument within the
       prescribed deadlines, the mortgagee shall be required to reimburse the amount of the
       claim paid, including the incentive.

HUD Handbook 4000.1, FHA Single Family Housing Policy Handbook, provides
information on partial claims and the required documents to be provided to HUD. Paragraph
III.A.2 (H)(6)(a) states:

   •   The mortgagee must deliver to HUD’s servicing contractor:

           •   The original partial claim promissory note, no later than 60 days from the
               execution date.

           •   The recorded subordinate mortgage, no later than six months from the execution
               date.

   •   When HUD has received Partial Claim documents that do not fully support the amount
       claimed by mortgagee, HUD will consider the documents incomplete. The mortgagee
       must timely correct the deficiencies to satisfy the six-month deadline for the mortgage to
       provide complete and accurate Partial Claim documents.

HUD Handbook 4740.2, REV-3, Title I and Other Debt Collection Guidance Handbook,
chapter 8, provides information regarding single-family partial claims referred to the Financial
Operations Center for collection from the borrower. The handbook states:

In exchange for HUD’s payment, the mortgagor is required to execute a promissory note and
subordinate mortgage payable to HUD. No payment is due until a callable event occurs (usually
a sale or refinance of the mortgaged property.) Once the note becomes due and payable,
Housing’s Oklahoma City National Servicing Center’s contractor issues a demand letter. If the
borrower fails to pay, the debt can be referred to the FOC [Financial Operations Center] for
appropriate collection action. The referral package must include supporting documentation
including a copy of the note and lien.



                                               18
  Appendix D
                                                                     Schedule of Boarding and Tracking Deficiencies


                                Boarding deficiencies                                                                                        Tracking deficiencies




                                         claim not boarded




                                                                                                                                                                                                            not collected after
                                                                                                                 payment canceled
                                                                             Mortgage missing




                                                                                                                                                                                                            Partial claim note
                                                                                                                                    Lender payments




                                                                                                                                                                                           Entry in SMART




                                                                                                                                                                                                                                  note or mortgage
                                                                                                                                                      mortgage release
                     Partial claim not




                                                                                                                 but not removed




                                                                                                                                                                                                                                  Amount entered
                                                                                                                                                                         entered but not
FHA case                                 Manual partial




                                                                             or unrecorded




                                                                                                                                                                                                                                  different from
                                                                                                                                                      Inappropriate
                                                             boarded twice




                                                                                                                                                                                           made in error




                                                                                                                                                                                                            loan matured
                                                                                                                                                                         paid by HUD
                                                             Partial claim




                                                                                                                 Partial claim




                                                                                                                                                                         Partial claim
                                                                                                 Note missing
 number




                                                                                                                                    not entered
                     boarded




011-3286219                                   x                              DNV33              DNV                    x
011-4312590                                   x                              DNV                DNV                    x
011-4550923                                   x                              DNV                DNV                                      x
011-4797423                                   x                                                                                          x
011-4808469                                   x                              DNV                DNV                                      x
011-5234772                                   x                                                  x                                                         x
011-5251633                                                                                                                                                                   x
011-5375197               x
011-6034623                                   x                                                                                          x
011-6042426                                   x                              DNV                DNV                    x
011-6162660               x
011-6210976                                   x                              DNV                DNV                    x
011-6438504                                   x
011-6506242                                   x                              DNV                DNV
011-6621263                                   x                              DNV                DNV                    x
011-6859782                                   x                              DNV                DNV                    x
011-7192891                                   x                              DNV                DNV                    x
011-7365709                                   x                              DNV                DNV                                      x



  33
       Did not verify (DNV) – We did not verify whether the document was entered into SMART or whether it was recorded at the county’s office.



                                                                                                                19
                         Boarding deficiencies                                                                                        Tracking deficiencies




                                  claim not boarded




                                                                                                                                                                                                     not collected after
                                                                                                          payment canceled
                                                                      Mortgage missing




                                                                                                                                                                                                     Partial claim note
                                                                                                                             Lender payments




                                                                                                                                                                                    Entry in SMART




                                                                                                                                                                                                                           note or mortgage
                                                                                                                                               mortgage release
              Partial claim not




                                                                                                          but not removed




                                                                                                                                                                                                                           Amount entered
                                                                                                                                                                  entered but not
                                  Manual partial
FHA case




                                                                      or unrecorded




                                                                                                                                                                                                                           different from
                                                                                                                                               Inappropriate
                                                      boarded twice




                                                                                                                                                                                    made in error




                                                                                                                                                                                                     loan matured
                                                                                                                                                                  paid by HUD
                                                      Partial claim




                                                                                                          Partial claim




                                                                                                                                                                  Partial claim
                                                                                          Note missing
 number




                                                                                                                             not entered
              boarded


011-7392625        x                                                   x                  x
011-7914681                            x                              DNV                DNV                    x
022-1931161                            x                               x                  x                                       x
023-3124397                                                                                                                                                            x
023-3408368                            x                                                                                                            x
023-3588367                            x                              DNV                DNV                    x
023-4038021        x
023-4479722                            x                              DNV                DNV                    x
023-5725405                                               x
031-3211589                            x                                                                                          x
031-3892650                            x                              DNV                DNV
031-4396421                            x                                                                                          x
042-8008858                                                            x
042-8152064                            x                              DNV                DNV                                      x
042-8414811                            x                                                                                          x
042-9301967                            x                              DNV                DNV                    x
042-9406580                            x                                                                        x                 x
043-8226947                            x                              DNV                DNV                                      x
044-4473199                                                                                                                       x
044-4517753                            x                              DNV                DNV                                      x
044-4779352                            x                              DNV                DNV                                      x
045-6364332                            x                              DNV                DNV                                      x
045-6378065                            x                                                                                          x
045-6460984                            x                              DNV                DNV                                      x
045-6600953        x
045-6715341                            x                              DNV                DNV                                      x
045-6852578                            x                              DNV                DNV                                      x




                                                                                                         20
                         Boarding deficiencies                                                                                        Tracking deficiencies




                                  claim not boarded




                                                                                                                                                                                                     not collected after
                                                                                                          payment canceled
                                                                      Mortgage missing




                                                                                                                                                                                                     Partial claim note
                                                                                                                             Lender payments




                                                                                                                                                                                    Entry in SMART




                                                                                                                                                                                                                           note or mortgage
                                                                                                                                               mortgage release
              Partial claim not




                                                                                                          but not removed




                                                                                                                                                                                                                           Amount entered
                                                                                                                                                                  entered but not
                                  Manual partial
FHA case




                                                                      or unrecorded




                                                                                                                                                                                                                           different from
                                                                                                                                               Inappropriate
                                                      boarded twice




                                                                                                                                                                                    made in error




                                                                                                                                                                                                     loan matured
                                                                                                                                                                  paid by HUD
                                                      Partial claim




                                                                                                          Partial claim




                                                                                                                                                                  Partial claim
                                                                                          Note missing
 number




                                                                                                                             not entered
              boarded


045-6997995                            x
045-7579227                            x                              DNV                DNV                    x
045-8396134                            x                              DNV                DNV                                      x
048-4641887                            x                              DNV                DNV                    x
048-5248983                            x                              DNV                DNV                                      x
048-5546640                            x                                                                                          x
048-5933272                            x                                                                                          x
048-6620584                            x                              DNV                DNV                    x
052-1698727        x
052-3601000                            x
052-4003562        x
052-4159842        x
052-4901459                                               x
052-5270664                                               x
052-7632633                            x                              DNV                DNV                    x
052-7695770                            x                              DNV                DNV                    x
061-1994746                            x                                                                        x                 x
061-2247230        x
061-2622039                                                                                                                       x
061-2943888                            x                               x                  x
061-3257575                            x                              DNV                DNV                    x
061-3265303                            x                              DNV                DNV                                      x
061-3297000                            x                              DNV                DNV                    x
061-3307426                            x
061-3449252                            x                              DNV                DNV                    x
061-3467393                            x                              DNV                DNV                    x
061-3600017                            x                              DNV                DNV




                                                                                                         21
                         Boarding deficiencies                                                                                        Tracking deficiencies




                                  claim not boarded




                                                                                                                                                                                                     not collected after
                                                                                                          payment canceled
                                                                      Mortgage missing




                                                                                                                                                                                                     Partial claim note
                                                                                                                             Lender payments




                                                                                                                                                                                    Entry in SMART




                                                                                                                                                                                                                           note or mortgage
                                                                                                                                               mortgage release
              Partial claim not




                                                                                                          but not removed




                                                                                                                                                                                                                           Amount entered
                                                                                                                                                                  entered but not
                                  Manual partial
FHA case




                                                                      or unrecorded




                                                                                                                                                                                                                           different from
                                                                                                                                               Inappropriate
                                                      boarded twice




                                                                                                                                                                                    made in error




                                                                                                                                                                                                     loan matured
                                                                                                                                                                  paid by HUD
                                                      Partial claim




                                                                                                          Partial claim




                                                                                                                                                                  Partial claim
                                                                                          Note missing
 number




                                                                                                                             not entered
              boarded


061-3840111                            x                              DNV                DNV                    x
061-4153034                                               x
091-3436243                            x                              DNV                DNV                                      x
091-3539989        x
091-3833569                            x                                                                                          x
091-4381566                            x                              DNV                DNV                                      x
091-4637752                            x                               x                  x                                       x
092-6576829                                                            x                  x                                                         x
092-7962145                            x                              DNV                DNV                    x
092-8168004                            x                               x                  x                     x
092-9367620                            x                                                                                          x
093-4210877                            x                              DNV                DNV                                      x
093-6074129                            x                                                                                                            x
093-6161733                            x                              DNV                DNV                    x
093-6552163                            x                              DNV                DNV
093-6810823                            x                              DNV                DNV                                      x
093-7865586                                               x
094-3844356                            x                              DNV                DNV                                      x
094-3995234                            x                                                                                          x
094-5569913                            x                               x                  x
094-5819319                            x                              DNV                DNV                    x
095-0730802        x                                                   x                  x
095-0732651                            x
095-0769169                            x
095-0806097                            x                              DNV                DNV                    x
095-1399604                            x                              DNV                DNV
095-1735953                            x                              DNV                DNV                    x




                                                                                                         22
                         Boarding deficiencies                                                                                        Tracking deficiencies




                                  claim not boarded




                                                                                                                                                                                                     not collected after
                                                                                                          payment canceled
                                                                      Mortgage missing




                                                                                                                                                                                                     Partial claim note
                                                                                                                             Lender payments




                                                                                                                                                                                    Entry in SMART




                                                                                                                                                                                                                           note or mortgage
                                                                                                                                               mortgage release
              Partial claim not




                                                                                                          but not removed




                                                                                                                                                                                                                           Amount entered
                                                                                                                                                                  entered but not
                                  Manual partial
FHA case




                                                                      or unrecorded




                                                                                                                                                                                                                           different from
                                                                                                                                               Inappropriate
                                                      boarded twice




                                                                                                                                                                                    made in error




                                                                                                                                                                                                     loan matured
                                                                                                                                                                  paid by HUD
                                                      Partial claim




                                                                                                          Partial claim




                                                                                                                                                                  Partial claim
                                                                                          Note missing
 number




                                                                                                                             not entered
              boarded


095-1773407                                               x
095-1830868                            x                              DNV                DNV
101-6354994                                                                               x                                                         x
101-7019944                                                                               x
101-7525599                            x                              DNV                DNV                    x
101-7637517                            x                              DNV                DNV                                      x
101-8099955                                                                               x                                                                                                                                      x
101-8845280                                                                                                                                         x
101-9256912                            x                              DNV                DNV                    x
101-9497087                            x                              DNV                DNV                    x
101-9668018                            x                              DNV                DNV                                      x
105-0181537                            x                                                                        x
105-0548695                            x                              DNV                DNV                    x
105-0626331                                                                               x
105-0641062                            x                                                                                          x
105-1322701                                                                                                                                                                                                                      x
105-1857206                                               x
105-2054238                            x
105-2410349                                               x
105-3423020                                                                                                                       x
105-3931202                                               x
105-3999898                            x                              DNV                DNV                    x
105-4033946                                               x
105-4054542                            x                                                                                          x
105-4264173                            x                              DNV                DNV                    x
105-4952897                            x
105-5203605                                               x




                                                                                                         23
                         Boarding deficiencies                                                                                        Tracking deficiencies




                                  claim not boarded




                                                                                                                                                                                                     not collected after
                                                                                                          payment canceled
                                                                      Mortgage missing




                                                                                                                                                                                                     Partial claim note
                                                                                                                             Lender payments




                                                                                                                                                                                    Entry in SMART




                                                                                                                                                                                                                           note or mortgage
                                                                                                                                               mortgage release
              Partial claim not




                                                                                                          but not removed




                                                                                                                                                                                                                           Amount entered
                                                                                                                                                                  entered but not
                                  Manual partial
FHA case




                                                                      or unrecorded




                                                                                                                                                                                                                           different from
                                                                                                                                               Inappropriate
                                                      boarded twice




                                                                                                                                                                                    made in error




                                                                                                                                                                                                     loan matured
                                                                                                                                                                  paid by HUD
                                                      Partial claim




                                                                                                          Partial claim




                                                                                                                                                                  Partial claim
                                                                                          Note missing
 number




                                                                                                                             not entered
              boarded


105-5331347                            x                                                                        x                 x
105-5539001                            x                              DNV                DNV                    x
105-5628833                                                            x
105-6013694                                                                                                                                                            x
105-6829560                                                           DNV                DNV                                      x
105-8699772                            x                              DNV                DNV                                      x
121-2492336                            x                              DNV                DNV                    x
131-7984011                                                                                                                                         x
132-1407849                            x                              DNV                DNV                    x
132-1504712                            x                              DNV                DNV                    x
132-1757638                            x                              DNV                DNV                                      x
132-2053297                                                           DNV                DNV                                      x
137-0045609                            x                              DNV                DNV                    x
137-1164896                            x                                                                        x
137-1422269                            x                              DNV                DNV                                      x
137-1542547                            x                              DNV                DNV                    x
137-1882998                            x
137-2440252                            x                                                                        x
137-2748729                                                                                                                       x
137-4265827                            x                              DNV                DNV
137-4316941                            x
137-4391148                            x                                                                        x
137-4479539                            x                               x
137-4989826                            x                              DNV                DNV
137-5096950                            x                              DNV                DNV
137-5122754                            x                              DNV                DNV                    x
137-5331793        x




                                                                                                         24
                         Boarding deficiencies                                                                                        Tracking deficiencies




                                  claim not boarded




                                                                                                                                                                                                     not collected after
                                                                                                          payment canceled
                                                                      Mortgage missing




                                                                                                                                                                                                     Partial claim note
                                                                                                                             Lender payments




                                                                                                                                                                                    Entry in SMART




                                                                                                                                                                                                                           note or mortgage
                                                                                                                                               mortgage release
              Partial claim not




                                                                                                          but not removed




                                                                                                                                                                                                                           Amount entered
                                                                                                                                                                  entered but not
                                  Manual partial
FHA case




                                                                      or unrecorded




                                                                                                                                                                                                                           different from
                                                                                                                                               Inappropriate
                                                      boarded twice




                                                                                                                                                                                    made in error




                                                                                                                                                                                                     loan matured
                                                                                                                                                                  paid by HUD
                                                      Partial claim




                                                                                                          Partial claim




                                                                                                                                                                  Partial claim
                                                                                          Note missing
 number




                                                                                                                             not entered
              boarded


137-5776134                            x                                                 DNV                                      x                 x
151-5628789                            x                                                                        x
151-6192171                            x                              DNV                DNV                                      x
151-6483832                            x                              DNV                DNV                                      x
151-7020429                            x                              DNV                DNV                    x
151-7065930                            x                              DNV                DNV                                      x
151-8068769        x
161-1901431                            x                              DNV                DNV                    x
161-2217866                            x                              DNV                DNV
161-2368058                            x                                                                        x                 x
161-2719514                            x                              DNV                DNV                    x
161-3384766                            x                              DNV                DNV                    x
182-1263990                                               x
197-3816068                                                                                                                       x
197-4126025        x                                                       x               x                                      x
197-4184176                            x                                                                                          x                 x
197-4215215                            x                              DNV                DNV                                      x
197-4303565                            x                                                                                                            x
197-4776776                            x                                                                                                            x
197-5289888                            x                              DNV                DNV                                      x
201-2255864                                                                                                                                         x
201-3934232                                                                                                                                                            x
201-4017101                            x
201-4094371                            x                              DNV                DNV
201-4477319                            x                              DNV                DNV                                      x
221-3161034                            x                                                                        x
221-3198448        x




                                                                                                         25
                                Boarding deficiencies                                                                                        Tracking deficiencies




                                         claim not boarded




                                                                                                                                                                                                            not collected after
                                                                                                                 payment canceled
                                                                             Mortgage missing




                                                                                                                                                                                                            Partial claim note
                                                                                                                                    Lender payments




                                                                                                                                                                                           Entry in SMART




                                                                                                                                                                                                                                  note or mortgage
                                                                                                                                                      mortgage release
                     Partial claim not




                                                                                                                 but not removed




                                                                                                                                                                                                                                  Amount entered
                                                                                                                                                                         entered but not
                                         Manual partial
FHA case




                                                                             or unrecorded




                                                                                                                                                                                                                                  different from
                                                                                                                                                      Inappropriate
                                                             boarded twice




                                                                                                                                                                                           made in error




                                                                                                                                                                                                            loan matured
                                                                                                                                                                         paid by HUD
                                                             Partial claim




                                                                                                                 Partial claim




                                                                                                                                                                         Partial claim
                                                                                                 Note missing
 number




                                                                                                                                    not entered
                     boarded


221-3291565                                   x                              DNV                DNV                    x
221-3416832                                   x                              DNV                DNV                                      x
221-3871855                                   x                              DNV                DNV                    x
221-4197997                                   x                                                                                          x            UTD34
221-4958039                                   x                              DNV                DNV                    x
221-5113967                                   x                              DNV                DNV                    x
222-1939278                                   x                              DNV                DNV                    x
231-0716671                                   x                                                                        x
231-1166049                                   x                              DNV                DNV                    x
241-3927814                                   x                                                                                          x            UTD
241-4392043                                                                                       x
241-4511875                                                                                                                              x
241-5374828                                   x                              DNV                DNV
241-5390179                                                                   x
241-5771910                                   x                                                                        x
241-6159615                                   x                                                                        x
241-7717891                                   x                              DNV                DNV                                      x
241-7723845                                                                   x                  x
241-8273446                                   x                              DNV                DNV                    x
241-8334455               x
241-8592398               x
241-8874266                                   x                              DNV                DNV                                      x
241-8970026                                   x                              DNV                DNV                    x
241-9498974                                   x
249-5053078                                   x                              DNV                DNV                                      x


  34
       Unable to determine (UTD) – We were unable to determine whether the mortgage was released



                                                                                                                26
                         Boarding deficiencies                                                                                        Tracking deficiencies




                                  claim not boarded




                                                                                                                                                                                                     not collected after
                                                                                                          payment canceled
                                                                      Mortgage missing




                                                                                                                                                                                                     Partial claim note
                                                                                                                             Lender payments




                                                                                                                                                                                    Entry in SMART




                                                                                                                                                                                                                           note or mortgage
                                                                                                                                               mortgage release
              Partial claim not




                                                                                                          but not removed




                                                                                                                                                                                                                           Amount entered
                                                                                                                                                                  entered but not
                                  Manual partial
FHA case




                                                                      or unrecorded




                                                                                                                                                                                                                           different from
                                                                                                                                               Inappropriate
                                                      boarded twice




                                                                                                                                                                                    made in error




                                                                                                                                                                                                     loan matured
                                                                                                                                                                  paid by HUD
                                                      Partial claim




                                                                                                          Partial claim




                                                                                                                                                                  Partial claim
                                                                                          Note missing
 number




                                                                                                                             not entered
              boarded


249-5192043                                                                                                                       x
249-5282806        x                                                   x                  x
249-5353195                            x                              DNV                DNV                    x
249-5642318                            x                              DNV                DNV                                      x
251-3123361                            x                               x                  x
251-3503088                            x                               x                  x                                       x
251-4130641                            x                                                                                                            x
251-4500360                            x
261-6263522                            x                              DNV                DNV                                      x
261-7802452                            x                              DNV                DNV                                      x
262-1514680                            x                                                                                          x
263-2808886                            x                              DNV                DNV                    x
263-3822701                            x                               x                  x
263-3827274                            x                               x                                                          x
263-4011346                            x                              DNV                DNV                                      x
263-4777681                            x                              DNV                DNV                                      x
271-3204529                            x                              DNV                DNV                    x
271-9304376                            x                               x                  x
277-0015948                            x                              DNV                DNV                    x
277-0615163                            x                              DNV                DNV
277-0639550                                                                                                                       x
277-0843919                            x                              DNV                DNV                    x
281-2771577                            x                              DNV                DNV                    x
281-2855598                            x                              DNV                DNV                    x
292-4076810                            x                              DNV                DNV                    x
292-4411228                            x
311-1617121                            x                              DNV                DNV                    x




                                                                                                         27
                         Boarding deficiencies                                                                                        Tracking deficiencies




                                  claim not boarded




                                                                                                                                                                                                     not collected after
                                                                                                          payment canceled
                                                                      Mortgage missing




                                                                                                                                                                                                     Partial claim note
                                                                                                                             Lender payments




                                                                                                                                                                                    Entry in SMART




                                                                                                                                                                                                                           note or mortgage
                                                                                                                                               mortgage release
              Partial claim not




                                                                                                          but not removed




                                                                                                                                                                                                                           Amount entered
                                                                                                                                                                  entered but not
                                  Manual partial
FHA case




                                                                      or unrecorded




                                                                                                                                                                                                                           different from
                                                                                                                                               Inappropriate
                                                      boarded twice




                                                                                                                                                                                    made in error




                                                                                                                                                                                                     loan matured
                                                                                                                                                                  paid by HUD
                                                      Partial claim




                                                                                                          Partial claim




                                                                                                                                                                  Partial claim
                                                                                          Note missing
 number




                                                                                                                             not entered
              boarded


311-1719566                            x                              DNV                DNV                                      x
311-1876903                            x                              DNV                DNV                    x
311-1888562                            x                              DNV                DNV
311-2214808                            x                              DNV                DNV                    x
321-2008929                                                                               x
321-2044722                            x                              DNV                DNV                    x
332-4769856                            x                                                                                          x
332-4781840                            x                                                                                                            x
332-4814643                            x                              DNV                DNV                    x
341-0537839        x
341-1079042                            x                              DNV                DNV                    x
351-3469261                            x                              DNV                DNV                                      x
351-4661237                            x                                                                                          x
351-4831237        x
351-4857359                            x
351-4939050                            x                              DNV                DNV                                      x
351-5069310                            x                              DNV                DNV                    x
351-5324635                            x                                                                                          x
351-5439000                            x                                                                                          x
351-5748454                            x                              DNV                DNV                    x
352-5709363                            x
352-5822065                                                                                                                                                                             x
352-5974918                            x                              DNV                DNV                    x
352-5994261                            x                              DNV                DNV                                      x
352-6193242                            x                              DNV                DNV                                      x
352-6232874                            x                              DNV                DNV                    x
352-6237871                            x                              DNV                DNV                    x




                                                                                                         28
                         Boarding deficiencies                                                                                        Tracking deficiencies




                                  claim not boarded




                                                                                                                                                                                                     not collected after
                                                                                                          payment canceled
                                                                      Mortgage missing




                                                                                                                                                                                                     Partial claim note
                                                                                                                             Lender payments




                                                                                                                                                                                    Entry in SMART




                                                                                                                                                                                                                           note or mortgage
                                                                                                                                               mortgage release
              Partial claim not




                                                                                                          but not removed




                                                                                                                                                                                                                           Amount entered
                                                                                                                                                                  entered but not
                                  Manual partial
FHA case




                                                                      or unrecorded




                                                                                                                                                                                                                           different from
                                                                                                                                               Inappropriate
                                                      boarded twice




                                                                                                                                                                                    made in error




                                                                                                                                                                                                     loan matured
                                                                                                                                                                  paid by HUD
                                                      Partial claim




                                                                                                          Partial claim




                                                                                                                                                                  Partial claim
                                                                                          Note missing
 number




                                                                                                                             not entered
              boarded


352-6245552                            x                              DNV                DNV                    x
352-6279409                            x                              DNV                DNV                    x
352-6330005                                               x
352-6370380                                               x
352-6475553                            x                                                                                          x
361-2685914                            x                              DNV                DNV                                      x
361-3368797                            x                              DNV                DNV                    x
361-3552044        x
361-3800888                                               x
371-3563398        x
371-3932359                            x                              DNV                DNV
371-3999446                            x                              DNV                DNV                    x
371-4183133                            x                              DNV                DNV
371-4901131                            x                                                                        x                 x
371-4997701                            x                              DNV                DNV                    x
372-2535087                                                            x                  x
374-3746770        x
374-3966442        x                                                   x                  x
374-4060766                            x                              DNV                DNV                    x
374-4095555                            x                              DNV                DNV                    x
374-4307031                            x                                                  x                                       x
374-4651566                            x                              DNV                DNV
374-4725891                            x                              DNV                DNV                                      x
374-4748597                            x                              DNV                DNV                    x
374-4792380                            x                              DNV                DNV                    x
374-4811575                            x                              DNV                DNV                                      x
374-4829973                            x                              DNV                DNV                    x




                                                                                                         29
                         Boarding deficiencies                                                                                        Tracking deficiencies




                                  claim not boarded




                                                                                                                                                                                                     not collected after
                                                                                                          payment canceled
                                                                      Mortgage missing




                                                                                                                                                                                                     Partial claim note
                                                                                                                             Lender payments




                                                                                                                                                                                    Entry in SMART




                                                                                                                                                                                                                           note or mortgage
                                                                                                                                               mortgage release
              Partial claim not




                                                                                                          but not removed




                                                                                                                                                                                                                           Amount entered
                                                                                                                                                                  entered but not
                                  Manual partial
FHA case




                                                                      or unrecorded




                                                                                                                                                                                                                           different from
                                                                                                                                               Inappropriate
                                                      boarded twice




                                                                                                                                                                                    made in error




                                                                                                                                                                                                     loan matured
                                                                                                                                                                  paid by HUD
                                                      Partial claim




                                                                                                          Partial claim




                                                                                                                                                                  Partial claim
                                                                                          Note missing
 number




                                                                                                                             not entered
              boarded


374-4894931                            x                              DNV                DNV                                      x
374-4905462                            x                              DNV                DNV                                      x
374-4943454                            x                              DNV                DNV                    x
374-5058405                            x                              DNV                DNV                    x
374-5073244                            x                              DNV                DNV                    x
374-5096070                            x                              DNV                DNV                    x
374-5112882                            x                                                                        x
374-5145880                            x                              DNV                DNV                    x
374-5149059                            x
374-5179458                            x                              DNV                DNV                    x
374-5179782                            x                              DNV                DNV
374-5215374                            x                              DNV                DNV
374-5292925                            x                              DNV                DNV                    x
374-5347513        x
374-5351422                            x                              DNV                DNV                    x
374-5357107                            x                              DNV                DNV                    x
374-5400066                            x                              DNV                DNV                                      x
374-5404951                            x                              DNV                DNV                    x
374-5434402                            x                                                                                          x
374-5496080                            x                              DNV                DNV                    x
374-5511285                            x                              DNV                DNV                    x
374-5977011                            x                              DNV                DNV                    x
374-6005342                                               x
381-4381672                            x                              DNV                DNV
381-4706080                            x                              DNV                DNV                    x
381-4940910                                                                               x
381-5010237                            x                              DNV                DNV                                      x




                                                                                                         30
                         Boarding deficiencies                                                                                        Tracking deficiencies




                                  claim not boarded




                                                                                                                                                                                                     not collected after
                                                                                                          payment canceled
                                                                      Mortgage missing




                                                                                                                                                                                                     Partial claim note
                                                                                                                             Lender payments




                                                                                                                                                                                    Entry in SMART




                                                                                                                                                                                                                           note or mortgage
                                                                                                                                               mortgage release
              Partial claim not




                                                                                                          but not removed




                                                                                                                                                                                                                           Amount entered
                                                                                                                                                                  entered but not
                                  Manual partial
FHA case




                                                                      or unrecorded




                                                                                                                                                                                                                           different from
                                                                                                                                               Inappropriate
                                                      boarded twice




                                                                                                                                                                                    made in error




                                                                                                                                                                                                     loan matured
                                                                                                                                                                  paid by HUD
                                                      Partial claim




                                                                                                          Partial claim




                                                                                                                                                                  Partial claim
                                                                                          Note missing
 number




                                                                                                                             not entered
              boarded


381-5661654                            x                                                                        x
381-6447549                            x                              DNV                DNV                    x
381-6526448                            x                              DNV                DNV                                      x
381-7989504                            x                              DNV                DNV                                      x
381-8086949                            x                              DNV                DNV                    x
381-8621286                            x                              DNV                DNV
381-9134217                            x
387-0806164                            x                              DNV                DNV                    x
411-3662925                                               x
412-4609953                            x                              DNV                DNV                                      x
412-5258604                                                            x
412-5372648                            x                               x                   x                                      x
412-5399590                            x                                                                                                            x
412-5998339                            x
412-6118034                            x                                                                                          x
412-6620554                                               x
412-6634909                            x                              DNV                DNV                    x
412-7686301                            x                              DNV                DNV                                      x
412-7979434                                               x
413-3895576                            x                              DNV                DNV                                      x
413-4261249        x
413-4467243                            x                                                  x
421-3608379                            x                              DNV                DNV                    x
421-3721120                            x                              DNV                DNV                                      x
421-3839802                            x                              DNV                DNV                    x
421-4340072                                                                               x
421-4856127                                               x




                                                                                                         31
                         Boarding deficiencies                                                                                        Tracking deficiencies




                                  claim not boarded




                                                                                                                                                                                                     not collected after
                                                                                                          payment canceled
                                                                      Mortgage missing




                                                                                                                                                                                                     Partial claim note
                                                                                                                             Lender payments




                                                                                                                                                                                    Entry in SMART




                                                                                                                                                                                                                           note or mortgage
                                                                                                                                               mortgage release
              Partial claim not




                                                                                                          but not removed




                                                                                                                                                                                                                           Amount entered
                                                                                                                                                                  entered but not
                                  Manual partial
FHA case




                                                                      or unrecorded




                                                                                                                                                                                                                           different from
                                                                                                                                               Inappropriate
                                                      boarded twice




                                                                                                                                                                                    made in error




                                                                                                                                                                                                     loan matured
                                                                                                                                                                  paid by HUD
                                                      Partial claim




                                                                                                          Partial claim




                                                                                                                                                                  Partial claim
                                                                                          Note missing
 number




                                                                                                                             not entered
              boarded


421-5199428                            x                              DNV                DNV                    x
431-4452098                                                                                                                       x
431-5792884                                               x
441-4318558                                                            x
441-5434949                            x                              DNV                DNV                                      x
441-6056664                            x                              DNV                DNV                                      x
441-6364578                            x                              DNV                DNV
441-6379520                            x                              DNV                DNV                                      x
441-6515880                            x                              DNV                DNV                    x
441-6535101                            x                              DNV                DNV                    x
441-6699058                            x                              DNV                DNV
441-6805597                            x                                                                        x
441-6912206                            x                              DNV                DNV                    x
441-6923323                            x                              DNV                DNV                    x
441-7016480                            x                              DNV                DNV                                      x
441-7772863        x
441-7846552                            x                              DNV                DNV                    x
441-8573703                            x
441-8635656                                                                                                                       x
441-8725319                                               x
441-9050704                            x                              DNV                DNV
441-9317003                            x                              DNV                DNV                    x
441-9349347                            x                              DNV                DNV                    x
441-9406598                            x                              DNV                DNV                    x
441-9507609                            x                              DNV                DNV                    x
442-1728830                                                            x                  x
442-1931979                                                            x                  x




                                                                                                         32
                         Boarding deficiencies                                                                                        Tracking deficiencies




                                  claim not boarded




                                                                                                                                                                                                     not collected after
                                                                                                          payment canceled
                                                                      Mortgage missing




                                                                                                                                                                                                     Partial claim note
                                                                                                                             Lender payments




                                                                                                                                                                                    Entry in SMART




                                                                                                                                                                                                                           note or mortgage
                                                                                                                                               mortgage release
              Partial claim not




                                                                                                          but not removed




                                                                                                                                                                                                                           Amount entered
                                                                                                                                                                  entered but not
                                  Manual partial
FHA case




                                                                      or unrecorded




                                                                                                                                                                                                                           different from
                                                                                                                                               Inappropriate
                                                      boarded twice




                                                                                                                                                                                    made in error




                                                                                                                                                                                                     loan matured
                                                                                                                                                                  paid by HUD
                                                      Partial claim




                                                                                                          Partial claim




                                                                                                                                                                  Partial claim
                                                                                          Note missing
 number




                                                                                                                             not entered
              boarded


442-2158284                            x                              DNV                DNV                    x
442-2372294                                                                                                                       x
442-2978523                            x                              DNV                DNV                    x
446-1428860                            x                              DNV                DNV                                      x
451-1204263                            x                                                  x                                                         x
461-3232724                                                                x
461-3326850        x                                                       x               x
461-4016942                            x                                                                                          x
461-4267765        x                                                                                                              x
481-3364334                            x                              DNV                DNV                    x
482-3142495                            x                              DNV                DNV                    x
482-3352879                            x                              DNV                DNV                                      x
482-4087553                            x                              DNV                DNV                    x
482-4310846                            x                              DNV                DNV                    x
483-2735360                                                                               x
483-3183519                            x                              DNV                DNV                                      x
483-3554227                            x
483-3625188                            x                              DNV                DNV                    x
483-4327101                            x                                                                                                            x
483-4479095                            x                              DNV                DNV                    x
491-6343894                            x                              DNV                DNV                    x
491-6829375        x                                                                      x
491-7344736                            x                              DNV                DNV                                      x
491-8588032        x
491-8975163                            x                              DNV                DNV                    x
491-9225269                            x                              DNV                DNV                                      x
492-3864800                                                            x




                                                                                                         33
                         Boarding deficiencies                                                                                        Tracking deficiencies




                                  claim not boarded




                                                                                                                                                                                                     not collected after
                                                                                                          payment canceled
                                                                      Mortgage missing




                                                                                                                                                                                                     Partial claim note
                                                                                                                             Lender payments




                                                                                                                                                                                    Entry in SMART




                                                                                                                                                                                                                           note or mortgage
                                                                                                                                               mortgage release
              Partial claim not




                                                                                                          but not removed




                                                                                                                                                                                                                           Amount entered
                                                                                                                                                                  entered but not
                                  Manual partial
FHA case




                                                                      or unrecorded




                                                                                                                                                                                                                           different from
                                                                                                                                               Inappropriate
                                                      boarded twice




                                                                                                                                                                                    made in error




                                                                                                                                                                                                     loan matured
                                                                                                                                                                  paid by HUD
                                                      Partial claim




                                                                                                          Partial claim




                                                                                                                                                                  Partial claim
                                                                                          Note missing
 number




                                                                                                                             not entered
              boarded


492-6436335                            x                              DNV                DNV                                      x
492-6469089        x                                                   x
492-7126535        x
492-7853198                            x
492-9227592                                               x
493-6213410                            x                                                                        x
493-6337163                            x                              DNV                DNV                    x
493-6436992        x
493-6977860                            x                              DNV                DNV                                      x
493-8514541                            x                                                                                          x
493-8527081                            x
493-8930227                            x                              DNV                DNV                                      x
493-9376744                            x
494-2546600                            x                              DNV                DNV                                      x
494-3668264                                               x
495-3573182                                                                x
495-5120621        x
495-6282700                            x                              DNV                DNV                                      x
495-6782655                            x                              DNV                DNV                                      x
495-6930479                            x                              DNV                DNV                                      x
495-7676779                            x                                                                                          x
495-7906765                            x                              DNV                DNV                    x
495-8021544                            x
495-8519364                            x                              DNV                DNV
498-0124119                            x                              DNV                DNV                    x
501-2143465                                                                                                                                                                                                 x
501-5177372        x




                                                                                                         34
                         Boarding deficiencies                                                                                        Tracking deficiencies




                                  claim not boarded




                                                                                                                                                                                                     not collected after
                                                                                                          payment canceled
                                                                      Mortgage missing




                                                                                                                                                                                                     Partial claim note
                                                                                                                             Lender payments




                                                                                                                                                                                    Entry in SMART




                                                                                                                                                                                                                           note or mortgage
                                                                                                                                               mortgage release
              Partial claim not




                                                                                                          but not removed




                                                                                                                                                                                                                           Amount entered
                                                                                                                                                                  entered but not
                                  Manual partial
FHA case




                                                                      or unrecorded




                                                                                                                                                                                                                           different from
                                                                                                                                               Inappropriate
                                                      boarded twice




                                                                                                                                                                                    made in error




                                                                                                                                                                                                     loan matured
                                                                                                                                                                  paid by HUD
                                                      Partial claim




                                                                                                          Partial claim




                                                                                                                                                                  Partial claim
                                                                                          Note missing
 number




                                                                                                                             not entered
              boarded


501-5311831        x
501-5317437                            x                              DNV                DNV                                      x
501-5592140                            x                               x                  x                                       x
501-5734826        x
501-6085809        x
501-6155577        x
501-6710054        x
501-6999053        x
501-7096498        x
501-7400181        x
501-7436793        x
501-7660923        x
501-7738608                            x                              DNV                DNV                                      x
512-0064434                            x
512-0071181                            x                                                                                                            x
512-1091538                            x                              DNV                DNV                    x
512-1180615                            x                              DNV                DNV                                      x
512-1403911                            x                              DNV                DNV                    x
512-1520696                            x                              DNV                DNV                    x
514-0291190                            x                              DNV                DNV                    x
521-3943177                            x                              DNV                DNV                                      x
521-6676238                            x                              DNV                DNV                                      x
521-7353349                            x                                                  x
541-4758252                                                                               x
541-5776587                            x                              DNV                DNV                    x
541-6643170                            x                              DNV                DNV                                      x
541-7267321        x                                                                      x




                                                                                                         35
                                  Boarding deficiencies                                                                                               Tracking deficiencies




                                             claim not boarded




                                                                                                                                                                                                                       not collected after
                                                                                                                        payment canceled
                                                                                  Mortgage missing




                                                                                                                                                                                                                       Partial claim note
                                                                                                                                             Lender payments




                                                                                                                                                                                                      Entry in SMART




                                                                                                                                                                                                                                             note or mortgage
                                                                                                                                                                mortgage release
                       Partial claim not




                                                                                                                        but not removed




                                                                                                                                                                                                                                             Amount entered
                                                                                                                                                                                   entered but not
                                             Manual partial
   FHA case




                                                                                  or unrecorded




                                                                                                                                                                                                                                             different from
                                                                                                                                                                Inappropriate
                                                                  boarded twice




                                                                                                                                                                                                      made in error




                                                                                                                                                                                                                       loan matured
                                                                                                                                                                                   paid by HUD
                                                                  Partial claim




                                                                                                                        Partial claim




                                                                                                                                                                                   Partial claim
                                                                                                        Note missing
    number




                                                                                                                                             not entered
                       boarded


  541-8047968                                     x                               DNV                DNV                                          x
  541-8806557                                     x                               DNV                DNV                      x
  541-9690288                                     x
  544-0723818                                     x
  544-0723903                                     x                               DNV                DNV                                          x
  544-0900904                                     x                               DNV                DNV                      x
  544-0960812                                     x                               DNV                DNV                      x
  544-0991543                                     x                               DNV                DNV
  544-1097970                                     x                               DNV                DNV                      x
  561-8161475                                     x                                                                                               x
  562-1679314                                     x                               DNV                DNV                                          x
  562-2305502                                                                                         x
  566-0436415                                   x                                 DNV                DNV                                          x
  581-3128180                                   x                                 DNV                DNV                      x
  581-3260707                                   x                                 DNV                DNV                      x
  581-3559963                                   x
  581-4642653                                   x                                 DNV                DNV                      x
  581-4818242                                   x                                 DNV                DNV                      x
  581-4844192                                   x                                 DNV                DNV                      x
  591-1214601                                   x
Total deficiencies        47                   350                  24               33              40                     156               139                  18                   4                 1                   1                    2
                                                                                                                                  35
 Total amount        $716,061              $2,297,706            $697,354                    $644,767                       $-             $1,055,113          $451,000            $93,409           $63,591            $1,905                 $622




     35
          Partial claim payments that were canceled were typically reissued by manual payment. When NSC neglected to record both the canceled payment and the
          manual payment, the effects canceled each other out.



                                                                                                                       36