U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT OFFICE OF INSPECTOR GENERAL September 9, 2016 MEMORANDUM NO: 2016-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 Borrowers 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 the property, and pays the property taxes and the mortgage insurance premiums. The loan 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. 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. RECOMMENDATION 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. 2
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)