InvestmentsMortgageReal Estate

Embattled Nevada housing agencies respond to allegations of wasted millions

Agencies suggest newly enacted changes should help more struggling homeowners

A recent bombshell report from a federal watchdog suggested that the agency in charge of Nevada’s portion of the government’s Hardest Hit Fund wasted $8.2 million that should have funded the program’s administration costs, while at the same time, drastically cutting the number of struggling homeowners admitted to the program.

Now, the agency in question and the agency that oversees it are responding to those charges, and claiming that the amount of wasted money is far less than the watchdog suggests – $8 million less, to be exact.

The allegations in question come from a recent report from the Office of the Special Inspector General for the Troubled Asset Relief Program (also called SIGTARP).

Included in the SIGTARP’s oversight is the Hardest Hit Fund, which was created in 2010 and is designed to help state housing finance agencies assist struggling homeowners and help stabilize neighborhoods in many of the nation’s hardest hit communities, and is part of the Troubled Asset Relief Program.

In that report, SIGTARP states that the Department of the Treasury provided $202 million in HHF funds to the Nevada Housing Department, which in turn contracted the Nevada Affordable Housing Assistance Corporation with administering the program in the state.

Along with receiving federal funding to meter out to struggling homeowners in various forms, the state housing agencies also received funding to administer the program.

According to the SIGTARP investigation, the Nevada state agency received $16.6 million to fund its operations, but used much less than that for its designed purpose.

The SIGTARP investigation found that $8.2 million in federal funding went to a number of expenses that were well outside the boundaries of what money was designated for.

According to Christy Goldsmith Romero, Special Inspector General For The Troubled Asset Relief Program, the NAHAC used the money as a “cash cow for every expense imaginable while all but stopping admitting new homeowners.”

While recognizing the issues that led to this investigation, the Nevada Department of Business and Industry’s Housing Division says in a statement that it has two main concerns with the SIGTARP report.

First is that the amount of money supposedly wasted by the NAHAC is nowhere close to $8.2 million, and second is that it already reported many of the same issues to the Treasury Department on multiple occasions.

“Certain NAHAC expenses (such as rent and payroll) cited by the SIGTARP as problematic may be found to be allowable under federal rules, and so the Department is not prepared to accept the total dollar value expressed in the audit report,” the Nevada Housing Department states.

“In fact, the Department believes that no more than $200,000 ultimately may be in question,” the statement continues. “It will be up to the U.S. Treasury to determine the final number, and the Department will work closely with the federal government in that regard. Whatever the final number, those responsible should be held accountable.”

In its lengthy statement, theNevada Housing Department states that it also previously recognized many of the same issues found by SIGTARP in its report, and disclosed those issues to the Treasury for two years, including in an October 2015 letter to the Treasury.

But the Nevada Housing Department states that its authority over the NAHAC is limited, and therefore it could only do so much to prevent the actions allegedly taken at the contractor.

“Nevada Affordable Housing Assistance Corporation is not a state agency and therefore the ability of the Department’s Housing Division to exercise the kind of oversight SIGTARP cited has been severely limited,” the Nevada Housing Department states. “The Department has taken what steps it could under existing law, including several requests to the U.S. Treasury to take a much harder look at NAHAC practices.”

Despite its two concerns, the Nevada Housing Department is “committed to rectifying the problems we have long pointed out to federal authorities and which are now raised in the SIGTARP report.”

As evidence of its previous efforts to affect change at the NAHAC, the Nevada Housing Department included in its statement a letter sent to the Treasury in October of last year.

In that letter, the Nevada Housing Department states that NAHAC, which originally operated with as many as three Nevada Housing Department employees on its board, began operating independently and in relative secrecy.

“Many of NAHAC’s operational decisions are determined at closed board sessions where neither the Housing Division nor the HHF advisory committee are allowed to attend,” the Nevada Housing Department stated in its October 2015 letter. “NAHAC believes itself separate from other state nonprofits, does not subscribe to the Nevada Open Meeting Law, and works without transparency. Furthermore, NAHAC does not make its location available to the public or have a published telephone number.”

It’s not surprising, therefore, that the number of homeowners helped by the Nevada program fell from 2,111 in 2013 to 541 in 2014 and 117 in 2015.

The Nevada Housing Department also noted that the NAHAC “alienated” prior working relationships with counseling agencies in the state and made it difficult for homeowners to obtain any assistance thanks to a lengthy and complex intake process.

The Nevada Housing Department statement also includes a response to its October letter from the Treasury, in which the Treasury cites the rapidly decreasing amount of help given to Nevada homeowners.

“At its peak level of production in the first quarter of 2013, NAHAC disbursed $22.7 million in program funds on behalf of 1,015 unique borrowers; by comparison NAHAC disbursed only $450,000 in program funds on behalf of 14 unique borrowers in the third quarter of 2015,” the Treasury stated. “Furthermore, during the third quarter of 2015, Nevada’s HHF programs registered a pull-through rate of 14%, the third lowest rate among all state HHF programs during that time period.”

Additionally, the Treasury memo notes that the NAHAC received more money for administrative costs than it distributed less money to Nevada homeowners during the second and third quarters of 2015.

“This metric raises a concern as to whether funds covering administrative costs are generating an appropriate level of benefit to struggling homeowners in Nevada through the HHF program,” the Treasury memo states.

The Treasury memo states that in order to dole out the full amount of HHF funding by the Dec. 31, 2017 cutoff date, the NAHAC would need to assist an average of approximately 90 new homeowners a month and disburse $2.9 million on average in monthly assistance.

But in the third quarter of 2015, Nevada reportedly assisted an estimated average of five new borrowers per month while providing an approximate average of $150,000 in monthly assistance, the Treasury memo states.

The Treasury memo “strongly recommends” that “fundamental structural changes are warranted at this point.”

For its part, the NAHAC said that it “welcomes” the SIGTARP report and has indeed already made significant changes to its operations.

An additional memo from the Nevada Housing Department notes how significant those changes are.

Among the changes at the NAHAC are “removing” its previous CEO, as well as opening up its meetings to the public.

“We welcome the recent SIGTARP audit report that details a less than acceptable record of performance in the Nevada Hardest Hit Fund program,” the NAHAC said in a statement this week.

“The NAHAC has recently put in place a new board and new leadership team that is determined to deliver better results for Nevadan homeowners in need and federal taxpayers supporting the program,” the NAHAC continued.

The NAHAC also hired Verise Campbell, the former deputy director of Nevada’s foreclosure mediation program, as its chief operating officer. “Since joining NAHAC, Ms. Campbell and the new leadership team have been shifting the organization’s culture into one of accountability and transparency better equipped to prevent and detect abuse and bad judgment within the HHF program,” the NAHAC noted.

The NAHAC board also now includes include three appointments made by the state.

NAHAC’s new management is now welcoming the partnership with the U.S. Treasury and the Nevada Housing Division and their joint mission to quickly distribute the hardest hit funds to those most needy, the Nevada Housing Department memo stated.

“We are servants of the public and overseeing public funds for the public good. And, as such, NAHAC’s records and transactions shall be available for public scrutiny from this point forward,” the NAHAC said in a statement.

“More importantly, we are installing new financial oversight, operational standards, and methods of accountability to guard against waste, fraud and abuse and earn back the trust of the State, the Federal government and the taxpayers,” the NAHAC continued. “We are confident with these changes that NAHAC and the Nevada Hardest Hit Fund program will continue providing help to those who have been hardest hit by the economic and housing crisis.”

As for the issues raised by the SIGTARP report, the Treasury Department said that it is reviewing the watchdog’s recommendations, which include “immediately firing” the NAHAC and repaying all the “wasted and abused ”bailout funds.

“Treasury has previously shared concerns about the performance of the Nevada Hardest Hit Fund program, including in an official memorandum provided to both the program and SIGTARP,” Mark McArdle, the Treasury’s Deputy Assistant Secretary for Financial Stability, said in a statement provided to HousingWire.

“We have also worked closely with those organizations to make significant changes to the Nevada HHF program in order to improve their performance and help struggling Nevadans remain in their homes,” McArdle continued. “We will look closely at these recommendations, and share SIGTARP’s goal of protecting HHF programs from waste, fraud and abuse.”

Most Popular Articles

Former Fannie Mae employee gets 6 years in prison for making $1 million on shady foreclosure sales

A former Fannie Mae employee will spend more than the next six years in prison after being found guilty of accepting more than a million dollars in bribes and kickbacks in exchange for selling Fannie Mae-owned foreclosures for less than market value.

Jan 15, 2020 By
3d rendering of a row of luxury townhouses along a street

Log In

Forgot Password?

Don't have an account? Please