HOUSING INVESTMENT GUARANTY PROJECT NICARAGUA

THE AUDIT, WHICH COVERED THE PERIOD 12/1/76 TO 12/31/78, CONSISTED OF A REVIEW OF BANCO DE LA VIVIENDA DE NICARAGUA (BAVINIC) AND THE SAVINGS AND LOAN ASSOCIATIONS" (SLA) MORTGAGE FILES AND REPORTS, AND OF MORTGAGE FORECLOSURE PROCEDURES, AS WELL AS INTERVIEWS WITH OCCUPANTS OF MORTGAGED DWELLINGS AND INSPECTIONS OF EMPTY MODEL HOUSES. THE AUDIT REVEALED THAT THE OVERALL PHYSICAL AND FINANCIAL CONDITION OF BOTH PROJECTS IS POOR. LACK OF MONIES, DUE TO HIGH DELINQUENCIES, HAS CREATED SERIOUS CASH FLOW AND MAINTENANCE PROBLEMS. LACK OF ATTENTION TO THE DAILY OPERATIONS OF THE PROJECTS BY BAVINIC AND AID HAS SERIOUSLY JEOPARDIZED THE PROJECTS" CHANCES OF SURVIVAL. BAVINIC HAD ALMOST 3% OF TOTAL PROJECT FUNDS ON HAND UNUSED BECAUSE REQUIRED LISTS OF ELIGIBLE MORTGAGES WERE NOT PREPARED. ITS FAILURE TO PREPARE REQUIRED CERTIFICATE OF MORTGAGE COLLATERAL REPORTS FOR AID RESULTED IN MORTGAGE LISTINGS WHICH DID NOT EQUAL THE TOTAL OUTSTANDING LOAN OBLIGATIONS. REQUIRED PROJECT REPORTS HAVE NEITHER BEEN PREPARED BY BAVINIC NOR REQUESTED BY AID SINCE CY 1977, THUS LEAVING AID UNAWARE OF THE UNUSED FUNDS AND UNABLE TO MONITOR MORTGAGE DELINQUENCIES ADEQUATELY. FINALLY, BAVINIC"S MORTGAGE FILES WERE INCOMPLETE AND THEIR MORTGAGE BALANCES THEREFORE UNVERIFIABLE. THE REVIEW DID DISCOVER, HOWEVER, SEVERAL UNCONTROLLABLE EXTERNAL FACTORS WHICH HAVE MITIGATED AGAINST PROJECT SUCCESS. PROMINENT AMONG THESE WERE THE 1972 EARTHQUAKE, WHICH CAUSED THE DESTRUCTION/LOSS OF MANY BAVINIC FILES, AND THE TURBULENT POLITICAL SITUATION, WHICH HAS INTERFERED WITH TAKING EFFECTIVE LEGAL ACTION AGAINST DELINQUENT HOMEOWNERS. IN LIGHT OF THESE FINDINGS, THE AUDITORS MADE SIX RECOMMENDATIONS TO BE IMPLEMENTED PRIOR TO OBLIGATING OR FUNDING ADDITIONAL FIRST MORTGAGES. THESE CALLED FOR A COORDINATION OF BAVINIC AND AID EFFORTS TO ELIMINATE THE PHYSICAL AND FINANCIAL PROBLEMS DISCUSSED ABOVE. IT WAS DECIDED BY THE AID OFFICE OF HOUSING THAT THE EXISTING POLITICAL SITUATION PROHIBITED THEIR IMPLEMENTATION AT THAT TIME.