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DOCUMENT EBSUME
02855 - [A2093196]
Need for Faicer Treatment of Homeowners' Cldims for Defects in
Existinq Insured Homes. CED-77-97; B-114860. Jujy 27, 1977. 21
pp. + 2 appendices (5 pp.).
Report to the Congress; by Elmer B. Staats, Comptroller General.
Issue Area: Domestic Housing and Community Development: Housing
for Low and Moderate Income Families (2101); Domestic
Housing and cismunity Development: Federal Credit Incentives
to Stimulate Housing (2104).
Contact: Community and Economic Development Div.
Budget Function: Community and Regional Development: Community
Development (451).
Organization Concerned: Department of Housing and Urban
Development.
Congressional Pelevance: House Comsittee on Banking, Currency
and Hrusing; Senate Committee on banking, Housing and Urban
Affairs; Congress. Rep. Ralph H. Metcalfe.
Authority: National Housing Act, as amended, sec. 518b) (12
U.S.C. 1735b(b) (Supp. V); S. 4368 (92nd Cong.). National
Housing Act, sec. 235 (12 U.S.C. 1715z). National Housing
Act, sec. 203 (12 U.S.C. 1709). National Housing Act, sec.
221 (12 US.C. 17151). Housing and Community Development Act
of 1974. Emergency Housing Act of 1975. Housing
Authorizatior Act of 1976.
Homeowners in Chicago who purchased homes with major
defects have been treated unfairly and inconsistently by the
Department of Housing and Urban Development (HUD) in their
efforts to seek compensation. Ambiguous criteria for evaluating
claims and only partial reimbursement were the major
deficiencies of the compensation program. Findings and
recommendations to rectify the situation are applicable
throughout the country. Findings/Conclusions: Better criteria
are needed to evaluate the validity of claims. A numier of
rejected claims are similar to claims considered valid.
Homeowners were not always informed of the right to appeal
rejected claims. Incorrect partial compensation for valid claims
was sometimes granted. Recommendations: HUD should more clea-lv
define criteria as to what consxitutes a serious defect.
Guidance given inspectors to determine whether defects existed
at the time of insurance commitment should pount out the
inappropriateness of relying (1) solely on a fixed time limit
without regard to other factors in each case, or (2) on the
original Federal Housing Administratlon appraisal. BUD should
direct the Chicago area office to discontinue using a fixed
time-limit criterion to the exclusion of other factors, resolve
serious doubts in favor of the homeowner in evaluating claims,
and reevaluate all claims rejected on the basis of inappropriate
criteria. Procedures for reimbursement should cover total actual
costs, includiny finance charges, and should be implemented in a](ViewImageLocal?handle=hein.gao/gaobaacmk0001&div=1&collection=&method=preview&ext=.png&size=3)