Federal Housing Administration: Improvements Needed in Risk Assessment and Human Capital Management
GAO-12-15
Published: Nov 07, 2011. Publicly Released: Nov 07, 2011.
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Highlights
The Department of Housing and Urban Development's (HUD) Federal Housing Administration (FHA) has helped millions purchase homes by insuring private lenders against losses from defaults on FHA-insured single-family mortgages. In recent years, FHA has experienced a dramatic increase in its market role due, in part, to the contraction of other mortgage market segments. The increased reliance on FHA mortgage insurance highlights the need for FHA to ensure that it has the proper controls in place to minimize financial risks while meeting the housing needs of borrowers. In addition to providing data on FHA's single-family workload, GAO was asked to evaluate (1) FHA's risk assessment strategy, including the extent to which it is consistent with HUD and GAO internal control standards, and (2) steps FHA has taken to manage the risks in its single-family programs. To address these objectives, GAO analyzed data from fiscal years 2006-2010 on single-family business volume and workload, reviewed FHA documents on risk assessment and changes made to manage risks (such as those to human capital), and interviewed FHA officials.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Housing and Urban Development |
Priority Rec.
As FHA continues to implement its new risk assessment strategy, the Secretary of HUD should direct the Acting Assistant Secretary for Housing-Federal Housing Commissioner to integrate the internal quality control initiative of the Office of Single Family Housing into the operational risk processes of the Office of Risk Management to comply with our internal control standards and HUD Handbook 1840.1. |
In response, the Federal Housing Administration (FHA) has taken steps to integrate the efforts of the Office of Single Family Housing and the Office of Risk Management. For example, in preparation for an inaugural annual risk assessment completed in September 2013, the Office of Risk Management and Regulatory Affairs developed baseline operational risk assessments using the Office of Single Family Housing's internal quality control initiative reports. In addition, FHA formed an operational risk committee. According to the committee's charter that was approved in March 2013, one objective of the committee was to establish an integrated risk assessment strategy. This committee met for the... first time in June 2013, did not meet again for a while, and then began meeting quarterly in fiscal year 2015. According to FHA officials, when they started assessing operational risks quarterly, they adopted aspects of the Office of Single Family Housing's internal quality control initiative and expanded it to cover all of FHA. Taking these steps should help FHA more effectively identify, plan for, and address risk.
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| Department of Housing and Urban Development |
Priority Rec.
As FHA continues to implement its new risk assessment strategy, the Secretary of HUD should direct the Acting Assistant Secretary for Housing-Federal Housing Commissioner to conduct an annual risk assessment to comply with our internal control standards and HUD Handbook 1840.1. |
In response, the Federal Housing Administration (FHA) completed an inaugural risk assessment for the Office of Single Family Housing in September 2013, and established a quarterly risk assessment process in 2015. For the inaugural risk assessment, the Office of Risk Management and Regulatory Affairs (ORMRA) designed and completed templates for baseline operational risk assessments and frequency and severity charts. ORMRA and the Office of Single Family Housing then conducted site visits to four homeownership centers. As a follow-up to the visits, ORMRA updated and finalized the operational risk assessments and frequency and severity charts to incorporate the findings from the site...
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| Department of Housing and Urban Development |
Priority Rec.
As FHA continues to implement its new risk assessment strategy, the Secretary of HUD should direct the Acting Assistant Secretary for Housing-Federal Housing Commissioner to establish ongoing mechanisms--such as use of the report templates from the 2010 consultant's report--to anticipate and address risks that might be caused by changing conditions, including risks related to the rapid increase in single-family business volume to comply with our internal control standards and HUD Handbook 1840.1. |
In response, the Federal Housing Administration (FHA) has taken steps to create ongoing mechanisms to anticipate and address risks that might be caused by changing conditions. For example, FHA created committees to address single-family credit and operational risks. The charters for both committees, which were approved in March 2013, indicate that they are to discuss and address emerging risks. According to FHA officials, the credit risk committee uses three different reports to anticipate and address emerging risks. For example, one report includes monthly foreclosure statistics and trends. In addition, FHA officials stated that since the second quarter of 2015, the operational risk...
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| Department of Housing and Urban Development |
Priority Rec.
To help ensure that FHA has sufficient staff in place with the appropriate skills to oversee single-family insurance programs during a period of continued program demand, the Secretary of HUD should direct the Acting Assistant Secretary for Housing-Federal Housing Commissioner to develop (1) a workforce plan for the Office of Single Family Housing that identifies the critical skills and competencies the agency will need to meet its future program goals, defines skill gaps, and includes a process to develop strategies to address gaps in the number, skills, and competencies of staff. |
In response, the Federal Housing Administration (FHA) has taken a number of steps. In November 2012, it published a workforce analysis and succession plan for the Office of Single Family Housing that (1) presented the demographic profile of the office, including the percentage of employees eligible to retire, (2) identified the general and technical competencies needed by employees in mission critical occupations, (3) acknowledged gaps in critical competencies, and (4) outlined additional steps that need to be taken to address the gaps. The plan also stated that FHA planned to hire a contractor to validate the information contained in the plan. In September 2013, a contractor completed a...
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| Department of Housing and Urban Development |
Priority Rec.
To help ensure that FHA has sufficient staff in place with the appropriate skills to oversee single-family insurance programs during a period of continued program demand, the Secretary of HUD should direct the Acting Assistant Secretary for Housing-Federal Housing Commissioner to develop a succession plan that outlines steps to help ensure that qualified employees succeed members of the workforce expected to retire over the next several years. |
In response, the Federal Housing Administration (FHA) has taken a number of steps. In November 2012, it published a workforce analysis and succession plan for the Office of Single Family Housing that (1) presented the demographic profile of the office, including the percentage of employees eligible to retire, (2) identified the general and technical competencies needed by employees in mission critical occupations, (3) acknowledged gaps in critical competencies, and (4) outlined additional steps that need to be taken to address the gaps. The plan also stated that FHA planned to hire a contractor to validate the information contained in the plan. In September 2013, a contractor completed a...
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HousingHousing programsHuman capital managementInternal controlsLending institutionsMortgage loansMortgage programsMortgage protection insuranceProgram managementPropertyProperty lossesQuality controlRisk assessmentRisk managementStandardsStrategic planning