Herman Ransom, Director, Office of Multifamily Housing - Hud-Oig

What We RecommendFurther, Prime Lending caused HUD-FHA to pay $110,343 in claims on eightineligible loans.Auditee’s ResponseWe recommend that the Deputy Assistant Secretary for Single Family Housingrequire PrimeLending to (1) reimburse the FHA insurance fund $103,013 inactual losses on 2 loans; (2) indemnify 10 loans that placed the FHA insurancefund at unnecessary risk with unpaid balances of more than $1.6 million, therebyputting an estimated $845,763 1 in funds put to better use; (3) repay $110,343 inclaims paid on 8 loans; and (4) ensure that it accurately enters information intoHUD’s Neighborhood Watch system and correct the data errors cited in thisreport.For each recommendation without a management decision, please respond andprovide status reports in accordance with HUD Handbook 2000.06, REV-4.Please furnish us copies of any correspondence or directives issued because of theaudit.We provided our discussion draft to PrimeLending on January 24, 2012, and heldthe exit conference on January 31, 2012. PrimeLending provided its response onFebruary 9, 2012. PrimeLending generally disagreed with the findings.The complete text of the auditee’s response, along with our evaluation of thatresponse, can be found in appendix B of this report.1According to the Single Family Acquired Asset Management System’s case management profit and loss byacquisition as of September 2010, FHA’s average loan loss experience is about 59 percent of the unpaidprincipal balance upon sale of a mortgaged property.2