U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT OFFICE OF INSPECTOR GENERAL September 9, 2016 MEMORANDUM NO: 2016-PH-1803 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 contrary to program residency requirements, 37 borrowers did not live in the property associated with the loan and were renting the property to participants in HUD’s Section 8 Housing Choice Voucher program. 1 Renting the properties to Section 8 program participants violated program requirements because HUD requires borrowers to reside in the mortgaged residence as their principal residence. 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 2013-PH-0002, issued December 20, 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. HUD’s Section 8 Housing Choice Voucher program provides Federal funds to assist very low- income families, the elderly, and the disabled in obtaining decent, safe, and sanitary housing in the private market. The funds are made available to public housing agencies through HUD’s Office of Public and Indian Housing, and the housing choice vouchers are administered locally by public housing agencies. The public housing agencies pay subsidies directly to landlords on behalf of program participants. Program participants are responsible for the difference between the rent charged by the landlord and the amount subsidized by the program. In February 2009, one borrower obtained a HECM loan on a property that he owned in Barnstable, MA. The borrower certified in writing on at least three occasions that the home was his principal residence. However, he was renting the property to a participant in HUD’s Housing Choice Voucher program when he made the certifications. His actions violated HUD’s principal residency requirements. RESULTS OF REVIEW On December 12, 2014, HUD’s Office of Program Enforcement filed a complaint against the borrower under the Program Fraud Civil Remedies Act. The borrower later acknowledged that he had not resided in the property since 2004. On December 16, 2015, HUD’s Office of Hearings and Appeals granted a motion for summary judgment and entered a judgement against the borrower and in favor of the Government. The motion makes the borrower liable to HUD for three civil penalties totaling $24,500. After negotiations with HUD, the borrower agreed to make monthly payments of $500 until the debt is paid in full. The borrower made the first payment on April 29, 2016. RECOMMENDATION We recommend that HUD’s Office of General Counsel, Office of Program Enforcement 1A. Acknowledge that the attached judgment and repayment agreement for $24,500 represents an amount due HUD. As of June 17, 2016, a repayment agreement of $24,500 was reached and it represents an amount due HUD. The borrower made an initial payment of $500 and agreed to make monthly payments, with final payment expected by April 1, 2020, for the remaining $24,000. In accordance with HUD Handbook 2000.6, REV-4, the final action target date will be set at May 1, 2020. At issuance of this memorandum, HUD’s Office of Inspector General will enter a management decision into HUD’s Audit Resolution and Corrective Action Tracking System, along with any supporting payment information received to date. 2
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 2016-09-09.
Below is a raw (and likely hideous) rendition of the original report. (PDF)