We reviewed Bank of America's (servicer) home equity conversion mortgage (HECM) servicing division located in Seattle, Washington. Bank of America is one of the largest lenders of HECM mortgages for properties located in the five southwest states in the U. S. Department of Housing and Urban Development's (HUD) Region VI jurisdiction. Our objective was to determine whether the servicer complied with HUD regulations, specifically, whether it verified that the properties remained the borrowers' primary residence, ensured maintenance of the properties, and processed HUD claims or property foreclosures in a timely manner.
The servicer did not comply with two HUD requirements in its administration of HECM loans. It did not maintain annual certifications of residency and did not notify HUD in a timely manner of the due and payable status of the mortgages of deceased borrowers. Both weaknesses could result in the properties remaining vacant longer, increased property deterioration, the need for additional maintenance, and potential decline in property value.
We recommended that the Assistant Secretary for Housing-Federal Housing Commissioner require the servicer to implement procedures to ensure that it completes the annual certifications of residency and notifies HUD of the due and payable status of mortgages within 60 days after a borrower's death.