HUD’s 1-Day Lending of $35 Million Rapped

Federal HUD officials approved $35 million in loans on the last day of fiscal 1988 in an apparent rush to spend the money before it was transferred to another program, according to auditors and agency documents.

Most of the Section 312 multifamily housing loans were approved despite incomplete applications or processing, according to auditors who alerted the department’s general counsel to the questionable loans. The auditors were told the government was legally bound to fund nearly all of them.

“Where commitments were made, they were honored, but (HUD) will not be making conditional commitments in the future,” said Housing and Urban Development spokesman Jack Flynn.

Section 312 loans totaling more than $40 million were approved in the final month of fiscal 1988, including $35.3 million Sept. 30, 1988, the final day of the budget year, according to HUD records.

During that eight-hour workday, 107 loans ranging from $15,000 to $6.1 million for conversion of a Spokane, Wash., hotel were approved, the records show.

Seven of the loans approved that month, including the one for the Spokane project, were later canceled.

There is nothing in the documents that suggests political favoritism was involved in the year-end loan approvals. However, auditors raised questions about the management of the multifamily loan program, saying department officials ignored regulations requiring proper documentation and other checks.

Those criticisms mirror others levied at HUD by auditors and congressional investigators who blame lax agency management for many of the problems being exposed in congressional hearings and internal reviews.