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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.   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.

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.  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.