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 Program Enforcement for action.

One borrower obtained HECM loans on two properties that he owned in Michigan.  For each loan, he certified that the underlying property was his principal residence.  His actions violated HUD’s principal residency requirements because he owned both properties at the same time.  HUD's Office of Program Enforcement determined that the lender was not duly diligent in underwriting the loan.  In July 2014, the Office of Program Enforcement notified the lender of its intent to file an action under the Program Fraud Civil Remedies Act.  To avoid further expenses and administrative proceedings, the lender and HUD negotiated a settlement agreement.  In the agreement, HUD alleged that the lender submitted the loan with a false certification that it was eligible for insurance endorsement, when it was not actually eligible.  To resolve the matter, the lender agreed to pay $7,500 and indemnify HUD for losses.  The agreement did not constitute an admission of liability or fault by any party.  The lender made the settlement payment in September 2014.