The Department of Housing and Urban Development: Audit of Loans with Downpayment Assistance – Part I

The Department of Housing and Urban Development (HUD) and the Office of Inspector General (OIG) were concerned about the potential for high claim rates on mortgages originated using down payment assistance programs offered by non profit organizations.  This concern led the OIG to question the risk prudence of insuring these loans. The OIG’s concerns grew when its examination of a small number of binders found that data on gift sources submitted by lenders via the Computerized Home Underwriting Mortgage System (CHUMS) were in many cases inaccurate or missing entirely. To assess objectively the risk of these mortgages and to identify appropriate actions to reduce the risk, HUD engaged Concentrance to conduct an audit of over 8,000 mortgage loan files selected by HUD.

The audit required a comparison of data found on key documents in the case binder to the information lenders had transmitted via the CHUMS system.  The audit also encompassed the collection of information on gift sources and amounts.  The results were coded in a Microsoft Access Database pre-approved by HUD.  To ensure the accuracy of the data, a three-stage quality control review process was implemented.

This binder review resulted in a high level analysis of selected intrinsic data trends derived from the information collected. Our analysis led to a seminal study, which was followed by a second report, provided guidance to HUD and the Government Accountability Office for evaluating the DPA program and making major policy changes.