Loss May Triple in Killed HUD Program : Housing: Auditors say the plan, which also financed marinas and golf courses, was of little benefit to people of low or moderate income.
A federal housing program that financed expensive projects including marinas and golf courses probably will cost the government $177 million in loan defaults, more than three times earlier estimates, federal auditors reported Thursday.
The audits, made public by the Department of Housing and Urban Development, said the program was mismanaged during the Ronald Reagan Administration, with grants often made on the basis of influence wielded by Republican consultants who had friends inside the agency.
The program, known as Title X, was killed last year by HUD Secretary Jack Kemp on grounds that it had proven to be of little benefit to moderate- or low-income Americans.
Auditors for the inspector general’s office at HUD said the program’s losses already have topped an earlier estimate of $55 million, and that more defaults are expected.
Although Kemp abolished the program, losses continued to mount this year because he had too few staff members monitoring previously funded projects, the reports said. Advised of this shortcoming, Kemp last week created a new unit to watch over ongoing projects, officials said.
The new audits identified two former HUD officials from the Reagan Administration, Shirley M. Wiseman and Maurice Barksdale, as having lobbied successfully for financially risky projects of dubious merit. Both have testified at congressional hearings about mismanagement at HUD conducted by Rep. Tom Lantos (D-San Mateo).
Wiseman received $182,600 for work as a consultant for two Texas developments--one in Dallas and the other in Austin--that were approved by HUD headquarters after being rejected by HUD regional offices, the audits said.
Although the developers, who received a total of $20 million in HUD financing, have repaid their loans on schedule, the long-term “financial viability” of their projects is questionable, the auditors reported.
Wiseman, in testimony to the Lantos subcommittee last summer, acknowledged that during the tenure of former HUD Secretary Samuel R. Pierce Jr. the agency often awarded housing grants based on political favoritism.
Pierce, after an initial appearance before the House panel a year ago, has refused to give further testimony on grounds that it might incriminate him.
Pierce is being investigated by independent counsel Arlin M. Adams, a former federal judge, to determine if he illegally favored Republican consultants in awarding multimillion-dollar housing grants.
HUD auditors cited a $15-million project in Florida known as Bluewater Bay as a prime example of a project that “should not have been approved.” They described the project as “a resort-type development” lying adjacent to a marina, a golf course with clubhouse, tennis courts and restaurants.
Summarizing 17 Title X projects that were studied in detail, the auditors said that “in several cases, HUD made questionable program decisions that appeared to favor the interests of developers over those of HUD.”
Not only did HUD executives make faulty decisions, but in one instance “a HUD field office employee admitted to increasing the appraised value of a project . . . because of pressure received from supervisors and a consultant,” the auditors reported.