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.  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 the same time.  We referred the violations to HUD’s Office of General Counsel for action. 

One borrower obtained two HECM loans on properties that she owned in Massachusetts and Florida.  For each loan, she certified that the underlying property was her principal residence.  Her actions violated HUD’s principal residency requirements because she owned both properties at the same time.  HUD’s Office of General Counsel found that the lender, Bank of America, NA, and its underwriter were not duly diligent in underwriting the loan.  To resolve the matter, HUD accepted a settlement agreement from the lender, in which the lender agreed to indemnify the loan.  The agreement did not constitute an admission of liability or fault by any of the parties.  The loan balance was approximately $206,000 when the Office of General Counsel completed its action.  The loan indemnification reduces the risk of loss to HUD’s Federal Housing Administration insurance fund by protecting HUD against losses from a future claim.