Final Audit Memorandum on "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)

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

                                                 September 9, 2016
                                                                                                  MEMORANDUM NO:

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

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

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


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


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
the property, and pays the property taxes and the mortgage insurance premiums. The loan

    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.
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 August 2006, two borrowers obtained a HECM loan on a property that they owned in Caguas,
Puerto Rico, and certified in writing that the home was their principal residence. However, in
September 2007, they obtained a second HECM loan on a property that they owned in Ocala,
FL, and certified in writing that it was their principal residence. These actions violated HUD’s
principal residency requirements because the borrowers owned both properties at the same time.

                                   RESULTS OF REVIEW

On June 20, 2013, HUD’s Office of Program Enforcement notified the borrowers of its intent to
file an action under the Program Fraud Civil Remedies Act. After negotiations with HUD, the
borrowers agreed to pay $12,000 to settle the matter. The agreement did not constitute an
admission of liability or fault by any party. The borrowers made the settlement payment on
November 10, 2015.


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

1A.    Acknowledge that the attached settlement agreement for $12,000 represents an amount
       due HUD.

       As of the date of this memorandum, the settlement amount due HUD was paid in full.
       Therefore, no further action is required by the Office of General Counsel. At issuance of
       this memorandum, we will enter a management decision into HUD’s Audit Resolution
       and Corrective Action Tracking System, along with the supporting payment information,
       to show that final action was completed.