Audit Finds Issues with Louisiana Homeowner, Rental Assistance Programs

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BATON ROUGE (The Center Square) — Millions in loans through Louisiana’s Small Rental Property Program and Restore Louisiana Homeowner Assistance Program were noncompliant in 2021, in addition to hundreds of millions identified in previous reports from the Louisiana Legislative Auditor.

Louisiana Legislative Auditor Mike Waguespack issued a report last week as part of a review of the Executive Department that found 42 property owners failed to comply with requirements for the Louisiana Office of Community Development’s Small Rental Property Program loans, representing about $4.3 million assigned to loan recovery. Those noncompliant loans are in addition to 1,194 others totaling $110.4 million identified in previous years.

The SRPP program involves approximately $653 million in federal funds distributed as part of the Road Home program in response to hurricanes that offers forgivable loans to qualified property owners who agree to offer rental properties at affordable rents to be occupied by lower-income households.

Participants received loans ranging between $10,000 and $100,000 per rental unit to accept limitations on rents and income of renters for a specific “affordability period” ranging between three and 20 years.

“As of June 30, 2021, of the 4,484 outstanding SRPP loans totaling $436.8 million, 1,078 noncompliant loans totaling $100.4 million are in active recovery status, and LOCD represented that current recovery efforts are to either recoup the loan funds or work with the applicants to bring them into compliance with the state’s continuing requirements of the program,” auditors wrote. “The remaining 158 noncompliant loans totaling $14.3 million have been determined by LOCD to be uncollectible for various reasons such as foreclosure, property seizure, or legal dispute.”

In addition to the SRPP loans, LOCD identified $901,739 in noncompliant Resort Louisiana Homeowner Assistance Program awards for 58 homeowners for fiscal year 2021.

Through the end of June 2021, more than $651 million in RLHAP awards had been disbursed to 17,160 homeowners. The program provided grant assistance to low-to-moderate income homeowners impacted by floods in 2016.

“LOCD is actively reviewing 36 files totaling $775,032 to make final determinations of the homeowner’s noncompliant status. At year end, LOCD reported that 263 homeowner files totaling approximately $5 million have been reviewed through its monitoring procedures,” according to the report. “Of the 263 homeowners, LOCD reported that 94 homeowners were placed in recapture status, 141 homeowners were cleared through the review process, 10 homeowners returned their grant award, in whole or in part, and 18 homeowners entered into repayment plans.”

Auditors noted that the state could be liable for noncompliant awards disallowed by the federal grantor, though it’s unclear if the federal government would demand repayment.

The Louisiana Legislative Auditor previously reported on inadequate grant recovery of the Homeowner Assistance Program Awards for the Community Development Block Grant/State’s Program, and while LOCD did not identify any new noncompliant files in 2021, a total of 27,468 files remained noncompliant as of the end of June 2021, totaling $907.2 million, auditors wrote.

In addition to the recovery issues, auditors found the Division of Administration, Office of Community Development – Local Government Assistance and LOCD did not comply with Federal Funding Accountability and Transparency Act reporting requirements for the CDBG program.

Auditors also found the Division of Administration, Office of Technology Services, did not have adequate controls over certain information technology security functions.

Patrick Forbes, executive director for the Office of Community Development, responded to the audit report in a series of letters to the Legislative Auditor in March, May, April and June.

The letters detail progress with recovery efforts, while stressing the main objective is to help folks with housing who need it. The letters also describe how the office corrected issues with reporting requirements, as well as progress toward resolving information technology security issues.

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