URBAN REDEVELOPMENT AUTHORITY apps. Urban Redevelopment Authority (URA) offers five loan programs to
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URBAN REDEVELOPMENT AUTHORITY RESIDENTIAL CONSUMER
Report by the Office of City Controller
MICHAEL E. LAMB CITY CONTROLLER
Douglas W. Anderson, Deputy Controller
Anabell Kinney, Management Auditor
Gloria Novak, Assistant Management Auditor
Bette Ann Puharic, Performance Auditor
Joe Chigier, Performance Auditor
June 7, 2011 To the Honorables: Mayor Luke Ravenstahl and Members of Pittsburgh City Council: The Office of City Controller is pleased to present this Performance Audit of the Urban Redevelopment Authority Residential Consumer Programs conducted pursuant to the Controllers powers under Section 404(c) of the Pittsburgh Home Rule Charter.
The Urban Redevelopment Authority (URA) offers five loan programs to rehabilitate homes: Home Improvement Loan Program (HILP), Homeowners Emergency Loan Program (HELP), Pittsburgh Home Rehabilitation Program (PHRP), Pittsburgh Party Wall Program (PPW) and Keystone Renovation and Repair Program (R&R). The Pittsburgh Home Ownership Program (PHOP) provides low interest mortgages to qualifying buyers.
Programs have varying income eligibility requirements and interest rates. Income
limits are higher for homes in target areas. Target areas are neighborhoods or parts of neighborhoods where little or no residential investment is occurring. Target area selection by the Department of City Planning is based on US Census tract demographics. This audit assesses compliance with program eligibility criteria, program participation in target areas and program marketing by local community organizations.
Findings and Recommendations
Home Improvement Loan Program (HILP) The HILP loan provides financial assistance to eligible City homeowners for rehabilitating and improving their homes. No equity requirement allows new homeowners to participate. Finding: The maximum loan amount is $15,000; all the loans were in compliance with this loan amount criterion. Finding: Of the 27 HILP loans 23 or 86% were within the income guidelines of the program. The remaining 4 loans or 14% were over the income guidelines indicating waivers had been approved or the loans were for properties in target areas. HILP loans in targeted areas have no income restrictions. Finding: The map provided by URA did not distinguish streets located within a target area. A list of all the streets in a target area does not exist.
Recommendation: For target areas, a street listing should be generated and made available on the URAs web site and in hard copy. This would enable city residents to determine if their home is located in a target area. Recommendation: Whether or not the property is in a target area should be designated on all loan documentation and in the URA loan database. Such information would make tracking of target loans easier. Finding: Twenty seven (27) HILP loans were approved in our 42 month sample period. This amounts to .65 loans per month, or less than 1 loan per month. Recommendation: The URA should investigate the reason(s) for such low participation in HILP loans and try to correct it. HILP is a valuable resource that should be utilized more. Homeowners Emergency Loan Program (HELP) HELP loans are available to low income homeowners for emergency repairs. Eligible repairs are limited to emergencies that have occurred within five (5) days of loan application. Finding: Five days is a short period of time to apply for a loan and may prevent people from participating when help is needed. Recommendation: The time to apply for a HELP loan should be increased. A two week window is a more reasonable and flexible time for people to find out about the program and apply for the loan. Finding: Thirteen (13) or 72% of the HELP loans were in compliance with the loan award requirements. Five (5) or 28% of the loans were over the maximum loan limits. Seven (7) or 39% of the individuals filing for loans were over the age of 62. Finding: Eighteen loans in the 24 month audit scope period amounts to .6 loans a month. This is not even 1 per month. It appears that participation in this program is low. Finding: Exceedingly low income limits may be reason for poor program participation. Recommendation: HELP income limits should be increased so more City residents are eligible for the program without needing a waiver. Program Income Eligibility and Loan Amount Waivers Finding: Of the 18 HELP loans, 2 applicants exceeded the loan income limits and 5 loans exceeded the maximum loan amount. All these loans were approved by the URAs Appeals Committee and Director of Housing.
Finding: The Director of Housing can choose to accept or reject the recommendation of the Appeals Committee and grant waivers of HELP, PHRP and PPW program guidelines. Finding: Nowhere on any program literature does it state that program income requirements or loan amount can be increased in special circumstances. Recommendation: URA residential program promotional material should note that a waiver may be available in certain circumstances. This could increase program participation by residents who exceed the income eligibility limits but could benefit from the loan programs. HELP Loan Default Rate Finding: There were 3 HELP loans that are in default. Any loans that default are forwarded to Credit Management Services. This is 17% of all HELP loans made. Finding: The 3 defaulted loans were in 3 different neighborhoods: Fairywood, Marshall Shadeland and Spring Hill-City View. Recommendation: Seventeen percent is a high default rate for HELP loans. URA administration should investigate the reasons why these loans went into default. This knowledge might help the administration prevent future default occurrences. Pittsburgh Home Rehabilitation Program (PHRP) The PHRP loan provides financial and technical assistance to eligible homeowners for rehabbing and improving residential owner-occupied properties . Finding: Twenty eight (28) or 34% of PHRP loans were made to recipients 62 years of age or older. Finding: The PHRP program helps improve home value and livability. Recommendation: The URA should work with AARP (American Association of Retired Persons), Citiparks Senior Centers and similar groups to promote the PHRP program to senior citizens. Pittsburgh Party Wall Program (PPW) PPWs objective is to provide timely financial aid and technical assistance to qualified home owners for reconstructing exposed party walls on residential row houses.
Finding: The Pittsburgh Party Wall Program is the Authoritys most popular residential repair program. The URA awarded 121 PPW grants from January 1, 2007 through July 10, 2010 in 32 city neighborhoods. PPW provides funding to landlords who rent to low and moderate income people if at least 51% of the units are occupied by households who meet the annual gross income requirement of not exceeding the 80% of the Pittsburgh Area Median Income adjusted for family size. Finding: Twenty (20) or 16% of the 121 PPW grants were awarded to owners of rental properties during our audit scope. Finding: There were 5 PPW grants awarded to participants over the maximum income limits. All 5 of these grants were located in a target area where no income limits exist. Finding: There were 8 PPW grants awarded to participants over the maximum grant amounts. All of these grants were approved by the Appeals Committee and the Director of Housing consistent with program guidelines. Keystone Renovation & Repair Program (R&R) This is a State program offered by the Pennsylvania Housing Finance Agency (PHFA) administered by the URA. The applicant must have an acceptable credit rating of at least 620 which is higher than most conventional loans. Finding: Only 4 R&R loans were awarded during the scope of our audit: one in 2008 in South Oakland, two in 2009 in Central North Side and Homewood West and one in 2010 in Bon Air. All loans were in compliance of the minimum and maximum loan amounts. No household income information was available in the data received from the URA. Overall Loan Default Rate Finding: According to URA staff, 3 of the 252 loans in the audit period defaulted. This represents 2% of all loans awarded.
Pittsburgh Home Ownership Program (PHOP) From January 1, 2007 to July 21, 2010, the PHOP program made 92 loans. Of these, 19 were made in the Target Neighborhood areas and 73 were in non target areas or General Program neighborhoods. Finding: The auditors tested whether the income limits and loan amounts were within the maximum limits of the PHOP Program per the database sent by the URA Housing Department. All 92 loans in the database did meet these criteria for the loans. Recommendation: The URA should continue the good job they are doing in making sure applicants are within the guidelines of the PHOP program. Finding: The current rate on the PHOP loan program is 5.99 %. This rate is not competitive with current 30 year loans and shorter duration loans. These loans are currently between 4 and 4.5 % in the private sector. Program Funding Each consumer program has a variety of funding sources including federal Community Development Block Grant (CDBG) and HOME funds and bond funds. Finding: Some monies can be moved between housing programs depending on the program, funding source and household income eligibility. Finding: Housing Recovery Prog