oversight

Final Civil Action Borrower Settled Alleged Violations of Home Equity Conversion Mortgage Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2014-06-30.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                                        U.S. DEPARTMENT OF
                                       HOUSING AND URBAN DEVELOPMENT
                                                 OFFICE OF INSPECTOR GENERAL



                                                    June 30, 2014
                                                                                                  MEMORANDUM NO:
                                                                                                       2014-PH-1804


Memorandum
TO:                Dane M. Narode
                   Associate General Counsel for Program Enforcement, CACC

                   //signed//
FROM:              David E. Kasperowicz
                   Regional Inspector General for Audit, Philadelphia Region, 3AGA

SUBJECT:           Final Civil Action
                   Borrower Settled Alleged Violations of Home Equity Conversion Mortgage
                   Program

                                                INTRODUCTION

We audited the U.S. Department of Housing and Urban Development’s (HUD) oversight of its
Home Equity Conversion Mortgage (HECM) program and found that 33 borrowers had more
than 1 loan under the program. 1 Having multiple loans violated program requirements because
HUD requires borrowers to reside in the mortgaged residence as their principal residence and
borrowers may not have more than one principal residence at a time. We referred the violations
to HUD’s Office of Program Enforcement for action under the Program Fraud Civil Remedies
Act.

                                                 BACKGROUND

HUD provides reverse mortgage insurance through its HECM program. The purpose of the
program is to enable elderly homeowners to convert the equity in their homes to monthly streams
of income or credit lines. To be eligible for a HECM loan, the borrower must be 62 years of age
or older, own the property outright or have a small mortgage balance, occupy the property as a
principal residence, not be delinquent on any Federal debt, and participate in a consumer
information session given by a HUD-approved program counselor.

The loan is secured by the borrower’s equity in the home. The borrower is not required to repay
the loan as long as the borrower continues to occupy the home as a principal residence, maintains

1
    HUD Office of Inspector General audit report number 2012-PH-0004, issued February 9, 2012
                                                          Office of Audit Region 3
                                                   The Wanamaker Building, Suite 10205
                                            100 Penn Square East, Philadelphia, PA 19107-3380
                                    Visit the Office of Inspector General Web site at www.hudoig.gov.
the property, and pays the property taxes and the mortgage insurance premiums. The loan
agreement defines “principal residence” as the dwelling where the borrower maintains his or her
permanent place of abode and typically spends the majority of the calendar year. A person may
have only one principal residence at a time. The borrower must certify to principal residency
initially at closing and annually thereafter.

In January 2008, one borrower obtained a HECM loan on a property that she owned in La
Puente, CA, and certified in writing that the home was her principal residence. However, in
August 2008, she obtained a second HECM loan on a property that she owned in Pueblo, CO,
and certified in writing that it was her principal residence. Her actions violated HUD’s principal
residency requirements because she owned both properties at the same time.

                                   RESULTS OF REVIEW

On March 26, 2014, HUD’s Office of Program Enforcement notified the borrower of its intent to
file an action under the Program Fraud Civil Remedies Act. After negotiations with HUD, the
borrower agreed to pay $3,000 to settle the matter. The agreement did not constitute an
admission of liability or fault by any party. The borrower made the settlement payment on
April 28, 2014.

                                    RECOMMENDATION

We recommend that HUD’s Office of General Counsel, Office of Program Enforcement,

1A.    Agree to allow the HUD Office of Inspector General to post the settlement of $3,000 in
       HUD’s Audit Resolution and Corrective Actions Tracking System as funds put to better
       use.




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