Missteps By HUD Contractor Resulted In Additional Holding Costs

Posted by Orb Staff on September 23, 2010 No Comments
Categories : Mortgage Servicing

Michaelson, Connor and Boul Inc. (MCB), a contractor selected by the U.S. Department of Housing and Urban Development (HUD) to market and manage HUD's real estate owned (REO) properties, did not adequately provide oversight of the closings on the sales of HUD homes in Michigan, HUD's Office of Inspector General (OIG) reports in a new audit.

MCB did not always request lead-based paint stabilization services and/or city presale inspections in a timely manner, the OIG says. Additionally, the audit found that MCB did not adequately monitor the closing agents and report to HUD deficiencies with closing sales of HUD homes as required under its contract.

As a result, HUD and MCB incurred an additional $1 million-plus in holding costs to maintain the homes in its inventory and lost the opportunity to receive more than $47,000 in proceeds as buyers canceled their sales contracts due to closing delays, the OIG reports.

HUD extended MCB's management and marketing contract, which was originally slated to terminate at the end of August, to Sept. 30. Given that MCB's contract is scheduled to expire in less than 30 days, the OIG report does not contain a recommendation for MCB to improve its procedures and controls regarding the oversight of the closings on HUD homes, because it will no longer perform this function.

SOURCE: HUD Office of Inspector General

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