Home Equity Conversion Mortgage Program Audit Reveals Non-Compliance


A recent audit of the Home Equity Conversion Mortgage program (HECM) which is administered by the U.S. Department of Housing and Urban Development (HUD) showed that 86% of the participants covered by the audit were not in compliance with the terms and conditions of the program.

The audit was carried out by the Office of the Inspector General (OIG) for the Department of Housing and Urban Development. It covered 159 borrowers participating in HECM. The Home Equity Conversion Mortgage program provides insurance to borrowers over the age of 62 who choose to use a reverse mortgage. By converting the equity which they own in their home, they can receive additional monthly income or a line of credit.

136 of all 159 borrowers which the audit covered ( 86%) did not comply with the residency requirements of HECM. They were not living in the properties which their reverse mortgage loans were based on. They were living in a different property for which they received a voucher under the Housing Choice Voucher program.

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The loans of the 136 borrowers who did not comply with the HECM residency requirements had different issues. Throughout the audit, 15 of these mortgage loans were terminated by the lenders who had issued them. The total outstanding balance on the remaining 121 reverse mortgage loans which were not in compliance was $15.6 million. The maximum claim amount was $19 million in total.

The HUD OIG report recommended that these 121 loans are declared in default and due and payable. The report further recommended that the lenders servicing these 121 provide documentation on the borrowers’ compliance with the residency requirement and verify it. Additional controls which would work to prevent the noncompliance with the residency requirements of HECM are suggested to be introduced. The guidelines on the steps, which lenders have to follow when borrowers fail to produce evidence that the property which their loan is based on is their permanent residence, are to be updated.



Christian Calvin mortgage Christian is a contributing writer for Mortgage.info. He is a graduate from the University of Tennessee with a degree in Communications and a concentration in Broadcasting. Christian has served as vice-president for a privately-held company for more than 20 years. Additionally, he has also applied his writing and business knowledge to various websites with a focus on business and sports news . . . both of which are passions. Christian enjoys playing golf and spending time with his family and friends.

Contact: christian@mortgage.info

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