9000.86 HUD Compliance Audit Program – Section 235 Assistance Payments (Title II Lender)
Client: / Closing Date:
Current Version: 11/2010

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Reviewed by 4
Reviewed by 5

Preparer Comments:

Note:The engagement team should use the FI HUD attribute sampling guidance to determine the appropriate sample size for each attribute being tested. For example, if the attribute being tested relates to documents included in a loan file then the engagement team should use the number of loan files related to that attribute as the population for sample selections. This form is also required to be signed-off by the manager and in-charge.

Overall Objective

The objective of this audit program is to document the auditor's tests of compliance related to HUD requirements related to Section 235 payments.

Guidance

Under Section 235, HUD sends assistance payments to the mortgagee on behalf of the mortgagor as long as the mortgagor is eligible for the payments. HUD executes a contract with the mortgagee for each mortgage. Once a mortgage is insured, many of the initial eligibility criteria cease their applicability; however, the mortgagor must meet other continuing eligibility criteria. In addition, the mortgagee must secure re-certifications of income, family composition, occupancy, and employment at least annually and as otherwise required by HUD (HUD Handbook 4330.1, chapter 10).

The audit program should be modified to address the audit requirements identified in the guidance referenced abovefor every applicable requirement identified.1

Identify the person primarily responsible for completion of this section:
Step
No. / SUGGESTED AUDIT PROCEDURES / DATE / W/P
REF / REMARKS
1. / Select a representative sample of mortgagors receiving Section 235 assistance payments from the records of the mortgagee.
2. / Test the mathematical accuracy of Form HUD-93102, Mortgagee’s Certification and Application for Assistance of Interest Reduction Payments, and Form HUD-300, Monthly Summary of Assistance Payments Due Under Sections 235(b), 235(j), or 235(i) or of Interest Reduction Payments Due Under Section 236, or equivalent computer printout. Report on any discrepancies.
3. / Compare a sample of HUD-93102s to copies paid by the U.S. Treasury to determine whether the dollar amounts are identical. Also, compare the number of Section 235 loans shown on the billing to the U.S. Treasury to the records of the mortgagee’s servicing portfolio. Report on any discrepancies. Copies of the paid HUD-93102s can be obtained from:
Office of the CFO – HUD
Assistant CFO for Accounting
Division of Accounting, Monitoring and Analysis
451 Seventh Street, SW, Room 3222
Washington, DC 20410-4500
4. / Select a sample of individual loan files and perform the following:
a.Examine documentary evidence that the mortgagee obtained and verified information concerning mortgagor income, family composition, and occupancy of the property.
b.Test the mathematical accuracy of assistance payments computed by the mortgagee and trace to the Form HUD-300 or computer printout. Tests should include both formula I and formula II computations and factors used in computations. Determine whether the formula providing the greater/lesser amount of assistance was used.
c.Determine whether the recertification was completed in a timely manner by the mortgagor (i.e., no sooner than 60 days before and no later than 30 days after the mortgage anniversary date). If the recertification was not completed in a timely manner, determine whether the auditee acted to suspend the assistance payments contract.
d.Review the mortgagee’s records of loans subject to recapture of assistance paid on behalf of mortgagors for documentation of the cumulative assistance paid so that it can be recaptured (Mortgagee Letter 81-38).

Conclusion:

The objective set forth at the beginning of this audit program section has been achieved and all "findings" identified have been evaluated for appropriate reporting in accordance with the HUD Handbook 4060.1 and Handbook 2000.04, Consolidated Audit Guide for Audits of HUD Programs.

Yes _____ No _____ Signature ______

Explanation of "No" conclusion

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1The principle compliance requirements related to HUD-assisted programsare provided in the HUD Handbook 4060.1 and Handbook 2000.04, Consolidated Audit Guide for Audits of HUD Programs. When there have been changes to the compliance requirements and the changes are not yet reflected in the guidance referred to above, the auditor should determine the current compliance requirements and modify the audit procedures accordingly.