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HUD Did Not Correctly Service all Due and Payable Partial Claims
HUD OIG reviewed the National Servicing Center’s handling of FHA partial claims and found widespread servicing and collection failures. 74 of 81 loans reviewed had errors, including missing documents, unsent demand letters, and late uploads. These issues were driven by rising claim volume, weak contractor oversight, and manual processes, increasing the risk that FHA will not collect debts owed to the insurance fund.
HUD OIG recommends that HUD improve partial‑claim servicing by:
- creating procedures to ensure borrowers are notified of outstanding partial‑claim balances,
- establishing formal oversight and performance metrics for the Loan Servicing Contractor, and
- enhancing partial‑claim tracking systems, including automation and better system integration.
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