During a House Financial Services Committee hearing prior to the congressional recess, Rep. Mike Haridopolos (R-FL) questioned Stephen Begg, the Acting Inspector General of U.S. Department of Housing and Urban Development, about identifying waste, fraud, and abuse of housing funds.
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00:00Chairman Hughes, Chairman from Florida, Mr. Herodopoulos is now recognized for five minutes.
00:06Thank you, Mr. Chairman, and thank you, Mr. Beck, for coming in today.
00:09We appreciate your candor in these answers, and of course that we fire them at you right away.
00:12I think the area that I want to get into in the report is the frustration that these incidents,
00:19let's just say at least of curiosity or concern, usually go unaddressed.
00:23It's got to be frustrating in your role that you make a solid recommendation
00:27and no one ever follows up on the darn thing.
00:30And I'm excited about what DOGE has done.
00:32It gives you even more opportunity to put sunshine on some of these matters
00:36and maybe can make your job easier to make sure those reforms are done
00:40so the folks who want to buy a house or get in a better living condition
00:43can make use of the good programs that are available,
00:46as opposed to the fraudsters who unfortunately take advantage of the system.
00:49So let me ask you a very wide-open question they might have gotten into earlier,
00:52but can you give a number or estimate how many high-priority recommendations
00:57still remain open or unimplemented after the recommendations are made by your group to HUD?
01:04Yes.
01:05We issued our priority open recommendations report for 2024 last year,
01:10and of the 35 we identified, I believe 24 remain open.
01:16We're in the process of updating that report and issuing a new one here in the next coming weeks,
01:21but the number will be in that 2030 zone.
01:26And then if you can give a little color to the ones that were, quote, addressed,
01:31did we see significant savings there, or did we see arrests made, fraud was conducted?
01:37What were the result of ones that were, quote, addressed?
01:40Well, the recommendations that we're referencing are programmatic in nature.
01:44So we've seen enhancements in information security.
01:48We've seen HUD's rental assistance program offices take action to clarify guidance,
01:55to put protocols in place to better track health and safety issues.
02:01It's those types of issues that we're seeing.
02:03And with that in mind, too, as a former business person myself, ROI is what we always look at.
02:09What do you get the most bang for the buck?
02:11And the idea is that, is there one that, some of these recommendations that would yield the most results in twofold?
02:19One is, of course, savings.
02:20Of course, we're looking for that given the budget shortfalls.
02:23But the other, more importantly, is to assist folks who truly need it and make sure the fraudsters are kind of addressed.
02:29But that said, which one of these recommendations would you put at the top of the list
02:34where you would get the most benefit so that we can kind of focus on that as opposed to just looking at a number?
02:39Or this last case being 35?
02:43Sure.
02:43I'll give a twofold answer since you opposed it two ways.
02:47In terms of fraud prevention, one of our priority open recommendations is creating stronger fraud risk management assessments across HUD's programs.
02:57If HUD starts the process of assessing those risks and builds prevention into its programs, that would reduce the negative impacts fraud has on its programs.
03:08With respect to financial recoveries, we did a review of how many people obtained FHA-insured loans who had delinquent federal tax debt.
03:18And in a one-year period, we estimated that $13 billion in FHA loans went to ineligible borrowers with federal tax debt,
03:28which would translate, in our view, to roughly a $6 billion monetary impact if you factor in the average loss rate for FHA on a mortgage.
03:38So taking action to obtain the tax information needed to prevent those ineligible borrowers from getting the loans in the first place could have a huge impact on HUD's Mutual Mortgage Insurance Fund.
03:50With that in mind, Mr. Begg, whose fault was it that these were approved in the first place?
03:56Was it a fraudulent application?
03:59Or was it the actions of the folks working at HUD who made a mistake?
04:03It's hard to say. Our review examined how many folks with delinquent federal tax debt obtained loans.
04:11The reason or the state of mind they had in obtaining those loans, we didn't examine.
04:16But what needs to happen is HUD either needs to obtain that information.
04:21And HUD believes it may require congressional authority to get that information from the IRS.
04:27Or it needs to require mortgage lenders to obtain that in their review of the applications.
04:34I want to disclose this, Mr. Chairman.
04:36I think the frustration a lot of folks feel is that they feel like the resources are there, the misallocation of funds, put it simply.
04:42And whether it be with Medicaid, HUD, so many vital programs where people are truly in need.
04:48It could be the disabled or folks in nursing homes in the Medicaid world.
04:52Or in this case, folks are just getting on their feet and are doing the right thing.
04:56They do it lawfully.
04:57But the folks who break the law never suffer a penalty.
05:01I mean, at some point when people are either knowingly breaking the law, and it was shown by fact pattern,
05:07we have to put, proverbially, someone in handcuffs and say, you know, you're not going to defraud the United States anymore.
05:14And I think that the IG report needs to focus on simply who are the worst actors.
05:19And if folks are breaking the law, they're denying people benefits, let alone defrauding taxpayers.
05:23I'm glad to see you lead this charge, Mr. Chairman, and I appreciate you bringing the witness forth.