HUD Housing audit leaves Jacksonville on the hook for 2.7 million

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Audit findings
Jacksonville's Housing and Neighborhood Department has to pay back the federal government $2.7 million because of mismanagement of a housing program. An audit conducted by the U.S. Department of Housing and Urban Development of the City's Home Investment Partnership Program, among other things, found that:
- The city approved a $900,000 loan for a company to purchase an affordable housing complex, despite the fact that company already owned the complex for more than two years.
- Three loans given for the purpose of buying or renovating affordable housing complexes were used on properties that ended in foreclosure.
- Because of the foreclosures, the three properties did not meet key requirements of the program.
- A $500,000 loan was given for the purchase of an affordable housing complex, but documentation verifying that purchase was lacking.


The one that really  really jumps out at me is the one that says "three loans given for the purpose of buying or renovating affordable housing complexes were used on properties that ended in foreclosure."    Let me give you an example of this could work out in Worcester.

1. A CDC, typically Main South, sells a property for say $250,000.
2. The home-owner has a "hard" first mortgage that they have to pay back for $200,000
3. There is, however, "soft" seconds and sometime third mortgages that they home-owner does not have to pay back because they are income eligible in the amount of $50,000.
4. The catch is that this underlying property has to remain in this person's hands or another income eligible person during the affordability period (on average 15 years).

What happens, if this house were to go into foreclosure during the affordability period and ownership falls into the bank's hands?   The PJ (Presiding Jurisdiction), in this case the City of Worcester, needs to pay back the $50,000.   Although the underlying CDC received the $50,000, they do not have to pay back one penny?   This has to be happening around the City of Worcester right now.