US Department of Housing and Urban Development
Southwest District
1600 Throckmorton, Room 406
Post Office Box 2905
Fort Worth, Texas 76113-2905
(817) 885-5551 FAX (817) 885-2725
September 16, 1996 96-FW-211-1805
MEMORANDUM FOR: Elsie Whitson, Director, Multifamily Housing Division, 6FHM
FROM: D. Michael Beard, District Inspector General for Audit, 6AGA
SUBJECT: Terrace and Villa Apartments
FHA Project Nos.: 082-11011-PUR/CON and 082-35252-PM
Jonesboro, Arkansas
Under our Operation Safe Home Program, we completed a review of records of the above properties
to find out whether the owner/management agent complied with regulatory agreement requirements
as they relate to the use of project funds. Our review disclosed the owner did not comply with the
Regulatory Agreements. However, you were able to satisfactorily settle the matter.
The owner violated the Regulatory Agreements and equity skimming statutes by repaying his
management company $137,099.52 for operating advances made prior to 1992 that were not
approved by HUD. The funds used to repay the advances included property income that secured
HUD's interests in the mortgages. The owner made these repayments during September 1995
through May 1996. The owner defaulted on the HUD insured loans in 1990 and had no surplus cash
available after that time. He said his accountant and lawyer advised him, because HUD was selling
the loans, to repay these prior years' advances if he wanted to get his money. Although he had
agreed to pay HUD a minimum payment under a Provisional Workout Agreement, he paid himself
instead of making payments to HUD as required. His last payment to HUD under the workout
agreement was in January 1995. HUD subsequently sold both loans in multifamily mortgage sales.
We provided our original draft finding to you and you flagged the owner's previous participation
clearance. After this, the owner expressed interest in making a cash purchase of another HUD
property in another jurisdiction. But HUD would not approve the sale because of the flag on the
owner's clearance. The owner then came to you and agreed to settle the matter. He made an initial
payment of $20,000 and made a promissory note for $149,262.92, payable to HUD in 30 monthly
installments. The total amount of the settlement was $169,262.92, which included the amount
mentioned above, plus $32,163.40 in audit costs. We concurred in the settlement. Because you
satisfactorily settled the matter with the owner, we are considering the matter closed.
If we can be of further assistance or if you have any questions concerning the above, please contact
Jerry Thompson, Assistant District Inspector General for Audit.
Terrace and Villa Apartments, Jonesboro, AR
Published by the Department of Housing and Urban Development, Office of Inspector General on 1996-09-16.
Below is a raw (and likely hideous) rendition of the original report. (PDF)