CARH’S BROADCAST E-MAIL – Regulatory Update

May 20, 2015

The Government Accountability (GAO) released a report yesterday, entitled: “Progress on GAO Recommendations and Preliminary Observations on Loan Guarantee Risk Management” (GAO-15-625T). Click here for a copy of the full report.  The Report was discussed at a hearing on May 19^th before the Subcommittee on Housing and Insurance, part of the House Financial Service Committee. The hearing was entitled “The Future of Housing in America: Oversight of the Rural Housing Service.” (Click here for a link to the webcast and provided testimony.) The hearing touched on several topics, including overlap among federal programs, Rural Housing Service mission and capacity, modernization and expiring Section 515 and 514 rural rental housing mortgages. The main focus was on the overlap in federal programs, specifically the single family Section 502 loan program and HUD single family programs.

What GAO Found

The report follows up three GAO reports issued since March 2011 (see GAO-11-329, GAO-12-554, and GAO-12-624), and is part of ongoing GAO review. This new report is an update on the status and GAO recommendations for GAO’s August 2012 report (Report 12-554).

In this August 2012 report, GAO recommended increased collaboration and program consolidation based on its analysis of overlap in housing assistance programs between USDA and HUD.  GAO also found selected multifamily housing programs served similar purposes. RHS generally agreed with the GAO recommendations and implemented one by formalizing collaborative efforts with other federal agencies on single-family housing programs.

The agency also implemented three of the seven recommendations GAO made in Report 12-624 issued in May 2012 to enhance the Agency’s efforts to identify and reduce improper rental assistance payments. GAO, in its newest report (Report 15-625T), has recommended additional implementation steps in the way RHS estimates and reports on improper payments. RHS has also addressed three of the seven recommendations made by GAO in the March 2011 report (Report 11-329) on oversight of the farm labor housing program. Again, in its newest report, GAO has indicated that further actions are required to implement the other four concerning RHS controls for ensuring tenant eligibility, among other issues.

GAO found that aspects of RHS’s risk management for the single-family mortgage guarantee program broadly align with federal requirements, while others are not fully consistent with requirements and leading practices. For example, RHS has policies and procedures for a number of risk- management functions addressed in Office of Management and Budget guidance (such as determining borrower creditworthiness and overseeing lenders). However, GAO said, RHS does not have written policies and procedures for a committee responsible for evaluating credit quality issues and addressing them through policy changes.

GAO performed this study because of RHS’ importance. RHS administers a number of direct loan, loan guarantee, and grant programs that support affordable housing and community development for rural residents. According to USDA financial and budget data, RHS manages a portfolio of almost $120 billion in housing loans and loan guarantees and administers more than $1 billion in rental assistance payments each year.