HUD Fails to Track Almost 13,000 Defaulted HECM Loans says OIG Report

For the last few years, the number of Home Equity Conversion Mortgages (HECM) in default from a failure to pay taxes and insurance has been hot topic for debate at events around the country.  Estimates from industry experts typically put the number around 10,000, but a new report from the Department of Housing and Urban Development’s Office of Inspector General says there are nearly 13,000 such loans.

During its investigation into the program, the OIG found that HUD failed to track 12,958 HECMs with a max claim amount of more than $2.5 billion that are in default due to failure to pay taxes and insurance.

According to the report, HUD routinely granted foreclosure deferrals because it was unwilling to foreclose on senior citizen borrowers, but the agency had no formal procedures.  In May 2009, HUD alerted servicers that it would not accept foreclosure deferral requests after April 30, 2009, for loans in default due to nonpayment of taxes and insurance.

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While HUD claimed it was developing a policy, it had not given servicers procedures for handling the loans. As a result, servicers held the loans and paid borrower’s taxes and insurance premiums totaling more than $35 million.  Additionally, from March 2009 to March 2010, the number of deferred loans increased 173 percent.

While HUD said it was not aware of the loans, a supervisor said she was not surprised by the number of defaulted loans being held by servicers due to nonpayment of taxes and insurance.  The OIG estimates that the sale of HECM foreclosures upon properties from October 1, 2008, to February 22, 2010, could cost HUD at least $1.47 billion.

“Given that the portfolio of defaulted loans had increased significantly, coupled with the rapid rise in the number of new HECM loans, it is crucial that HUD act swiftly to issue guidance on how to resolve the loans currently in default and implement policies to reduce or prevent future occurrences,” said the OIG.

In response to the report, HUD said it’s developing formal policy guidance that addresses the prevention of future defaults. It’s also drafting instructions to servicers on the actions that must be taken to address the existing portfolio of defaulted or deferral loans.  According to HUD, there are various ways to address the issue, which includes possibly establishing a minimum income or credit level to ensure that the borrowers have the funds for house expenses or setting aside funds at loan origination for these expenses.

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  • Mr. McKeon,rnrnAn actuarial report of this nature is a fancy name for a sophisticated form of a projection. The report is generally only as valid as the assumptions upon which it is based. Personally I think they are reasonable but OMB does not.rnrnHUD is not crying wolf. You keep making these baseless charges. Did you read the July 2009 GAO report? I guess not.rnrnHUD has to address the funds as directed by the President and his OMB. It must also implement what it is directed to do by Congress unless it is practically impossible or unreasonably possible.

  • It appears that HUD is crying wolf with the prospect of losses on foreclosed rnproperties. In the Actualial Analysis of HECM loans for FY 2009, there are two insurance funds HUD has for RMs – prior to 2009, premiums went into the General Insurance Fund and in fiscal year 2009 moved all the new HECM endorserments to the Mutual Mortgage Insurance Fund (MMI). The study indicates that these funds are sufficient to cover losses under any scenario presented.

  • It’s about time HUD got called out on this. Only a government agency can get away with discontinuing a long-standing practice like the foreclosure deferral program and not provide anything in its place. When I came into this industry over 10 years ago T&I defaults were a problem, and possible solutions were not even being discussed. Five years ago Fannie Mae was trying to develop options to foreclosure but that too was a dead-end.rnrnI cannot help but wonder if the previous posting by RMD on T&I defaults back in June didnu2019t do something to shake HUD or the OIG loose, so if it was responsible even in a small way, we should all be appreciative of the great work the Admin does for our industry.rn

  • There are four primary groups which hold HECMs: 1) Fannie Mae, 2) investors at large, 3) lenders due to a number of different reasons, and 4) HUD due to assignments. It seems as if the number of lenders which hold any significant numbers of HECMs after endorsement would be small. rnrnIt seems as if HUD should know how many HECMs are in default in its pool unless its servicer(s) has not provided that information. It seems it would be a simple matter to get that information from Fannie Mae.rnrnThe place where it will be hardest to gather such information is from investors. However, since high investor participation is a fairly recent phenomenon, it would seem this group would have a relatively low number of defaults in its pools.rnrnHUD should put the oar in the water and gather that information. Perhaps HUD OIG has done that work. If so, HUD should keep that information current.rnrnIf that number does not grow significantly over the next few years, it will be very surprising. With the advent and popularity of closed end HECMs coupled with low appreciation rates, it would seem that the industry will see a huge increase in the number of such defaults. HUD needs to get control of the appropriate information flow on these HECMs just as quickly as possible.rn

  • Mr. McKeon,rnrnAn actuarial report of this nature is a fancy name for a sophisticated form of a projection. The report is generally only as valid as the assumptions upon which it is based. Personally I think they are reasonable but OMB does not.rnrnHUD is not crying wolf. You keep making these baseless charges. Did you read the July 2009 GAO report? I guess not.rnrnHUD has to address the funds as directed by the President and his OMB. It must also implement what it is directed to do by Congress unless it is practically impossible or unreasonably possible.

  • It appears that HUD is crying wolf with the prospect of losses on foreclosed rnproperties. In the Actualial Analysis of HECM loans for FY 2009, there are two insurance funds HUD has for RMs – prior to 2009, premiums went into the General Insurance Fund and in fiscal year 2009 moved all the new HECM endorserments to the Mutual Mortgage Insurance Fund (MMI). The study indicates that these funds are sufficient to cover losses under any scenario presented.

  • It’s about time HUD got called out on this. Only a government agency can get away with discontinuing a long-standing practice like the foreclosure deferral program and not provide anything in its place. When I came into this industry over 10 years ago T&I defaults were a problem, and possible solutions were not even being discussed. Five years ago Fannie Mae was trying to develop options to foreclosure but that too was a dead-end.rnrnI cannot help but wonder if the previous posting by RMD on T&I defaults back in June didnu2019t do something to shake HUD or the OIG loose, so if it was responsible even in a small way, we should all be appreciative of the great work the Admin does for our industry.rn

  • There are four primary groups which hold HECMs: 1) Fannie Mae, 2) investors at large, 3) lenders due to a number of different reasons, and 4) HUD due to assignments. It seems as if the number of lenders which hold any significant numbers of HECMs after endorsement would be small. rnrnIt seems as if HUD should know how many HECMs are in default in its pool unless its servicer(s) has not provided that information. It seems it would be a simple matter to get that information from Fannie Mae.rnrnThe place where it will be hardest to gather such information is from investors. However, since high investor participation is a fairly recent phenomenon, it would seem this group would have a relatively low number of defaults in its pools.rnrnHUD should put the oar in the water and gather that information. Perhaps HUD OIG has done that work. If so, HUD should keep that information current.rnrnIf that number does not grow significantly over the next few years, it will be very surprising. With the advent and popularity of closed end HECMs coupled with low appreciation rates, it would seem that the industry will see a huge increase in the number of such defaults. HUD needs to get control of the appropriate information flow on these HECMs just as quickly as possible.rn

  • Mr. McKeon,rnrnAn actuarial report of this nature is a fancy name for a sophisticated form of a projection. The report is generally only as valid as the assumptions upon which it is based. Personally I think they are reasonable but OMB does not.rnrnHUD is not crying wolf. You keep making these baseless charges. Did you read the July 2009 GAO report? I guess not.rnrnHUD has to address the funds as directed by the President and his OMB. It must also implement what it is directed to do by Congress unless it is practically impossible or unreasonably possible.

  • It appears that HUD is crying wolf with the prospect of losses on foreclosed rnproperties. In the Actualial Analysis of HECM loans for FY 2009, there are two insurance funds HUD has for RMs – prior to 2009, premiums went into the General Insurance Fund and in fiscal year 2009 moved all the new HECM endorserments to the Mutual Mortgage Insurance Fund (MMI). The study indicates that these funds are sufficient to cover losses under any scenario presented.

  • It’s about time HUD got called out on this. Only a government agency can get away with discontinuing a long-standing practice like the foreclosure deferral program and not provide anything in its place. When I came into this industry over 10 years ago T&I defaults were a problem, and possible solutions were not even being discussed. Five years ago Fannie Mae was trying to develop options to foreclosure but that too was a dead-end.rnrnI cannot help but wonder if the previous posting by RMD on T&I defaults back in June didnu2019t do something to shake HUD or the OIG loose, so if it was responsible even in a small way, we should all be appreciative of the great work the Admin does for our industry.rn

  • There are four primary groups which hold HECMs: 1) Fannie Mae, 2) investors at large, 3) lenders due to a number of different reasons, and 4) HUD due to assignments. It seems as if the number of lenders which hold any significant numbers of HECMs after endorsement would be small. rnrnIt seems as if HUD should know how many HECMs are in default in its pool unless its servicer(s) has not provided that information. It seems it would be a simple matter to get that information from Fannie Mae.rnrnThe place where it will be hardest to gather such information is from investors. However, since high investor participation is a fairly recent phenomenon, it would seem this group would have a relatively low number of defaults in its pools.rnrnHUD should put the oar in the water and gather that information. Perhaps HUD OIG has done that work. If so, HUD should keep that information current.rnrnIf that number does not grow significantly over the next few years, it will be very surprising. With the advent and popularity of closed end HECMs coupled with low appreciation rates, it would seem that the industry will see a huge increase in the number of such defaults. HUD needs to get control of the appropriate information flow on these HECMs just as quickly as possible.rn

  • There are four primary groups which hold HECMs: 1) Fannie Mae, 2) investors at large, 3) lenders due to a number of different reasons, and 4) HUD due to assignments. It seems as if the number of lenders which hold any significant numbers of HECMs after endorsement would be small. rnrnIt seems as if HUD should know how many HECMs are in default in its pool unless its servicer(s) has not provided that information. It seems it would be a simple matter to get that information from Fannie Mae.rnrnThe place where it will be hardest to gather such information is from investors. However, since high investor participation is a fairly recent phenomenon, it would seem this group would have a relatively low number of defaults in its pools.rnrnHUD should put the oar in the water and gather that information. Perhaps HUD OIG has done that work. If so, HUD should keep that information current.rnrnIf that number does not grow significantly over the next few years, it will be very surprising. With the advent and popularity of closed end HECMs coupled with low appreciation rates, it would seem that the industry will see a huge increase in the number of such defaults. HUD needs to get control of the appropriate information flow on these HECMs just as quickly as possible.rn

    • I believe that HUD has the answer to that already I have called HUD headquarters in Washington DC as well as in Washington State I have yet to get a reply back as to an answer to my mother’s question why was she not recognized as a surviving spouse non borrower they have given me the answer 1 she did not get the note in time 30 days it’s 90 number to reason she did not live there she did they even took her name off the deed and put my father’s on it and then insured her that by putting her as a trustee that she would be able to remain in the house as a non-borrowing spouse it was a way of looping around the rules I believe that hide is just as much to blame as the bank I believe that champion mortgage is guilty have not telling debt non-borrowing spouses what is required of them from the beginning when their spouse passes away from their first phone call I believe that they should be given a new pamphlet and step by step help and what to do it’s overloading it’s unbearing and unrealistic to expect these seniors to remember and follow through from probate signing the note requesting to stay there paying the taxes going to the court I believe it’s wrong and unjust I wish I could be hired to go in and do a complete audit on HUD I would bet my goldfish this is life that the fault begins there

      • Ms. Reed,

        My comment immediately above was written 8 years ago. The situation is much different today than back in 2010.

        First, when did the HECM borrower pass away?

        There are two different Mortgagee Letters governing this matter. The first is Mortgagee Letter 2015-2 but it only deals with HECMs with case numbers assigned after April 26, 2015. The second is Mortgagee Letter 2015-15 that deals with HECMs with case numbers assigned before April 27, 2015.

        No one can really help you unless you provide them with the case number assignment date. So Second, can you please provide it so that your case can be looked into? Champion probably has it.

        I am helpless to help you without those two dates.

  • It’s about time HUD got called out on this. Only a government agency can get away with discontinuing a long-standing practice like the foreclosure deferral program and not provide anything in its place. When I came into this industry over 10 years ago T&I defaults were a problem, and possible solutions were not even being discussed. Five years ago Fannie Mae was trying to develop options to foreclosure but that too was a dead-end.rnrnI cannot help but wonder if the previous posting by RMD on T&I defaults back in June didnu2019t do something to shake HUD or the OIG loose, so if it was responsible even in a small way, we should all be appreciative of the great work the Admin does for our industry.rn

    • you’re right Fannie Mae and HUD oughta be ashamed of their selves and the employees that are just going by the rules they are not when it comes down to it they don’t call back with the answers that they say they’re going to call you back with after they do an investigation I wrote The White House I got a response back from employees there saying that mr. president Donald Trump was very glad to receive the letter from me they gave me a number of Hud headquarters to call I did so after being transferred to three different departments I finally spoke with the gentleman that was mentioned informed me that there would be an investigation and that someone would be getting ahold of me soon that was in November my mother was in the hospital and we were lucky to have her alive the house was to go to auction on November 17th and I was pleading for help somehow someone had pulled it out of the auction and I would like to personally thank them if I knew who it was because they had done the right thing my mother is still receiving letters pay in full or move out the house is back in foreclosure and we are waiting for another Sheriff’s note to be placed on her door we are all burnt out from this long 3 or fight that is hard to get my mother to move forward I am trying to get HUD to pay the insurance on this home has to the borrower has passed away the house is not worth what they are asking but it is my mother’s home there is major work that needs to be done and we would like to use the insurance to do so or pay it off and we will get a loan to do it I would just like my I would just like my mother’s last days of her life or years and HUD has all the power to do just that if they do not they will be my mother and my disabled brother and another home either way you look at it I will be taking care of my family so why don’t they just write this off and do the right thing or all the non-borrowing spouses that are left to take care of all these matters all I think in my heart is shame on you HUD

  • It appears that HUD is crying wolf with the prospect of losses on foreclosed rnproperties. In the Actualial Analysis of HECM loans for FY 2009, there are two insurance funds HUD has for RMs – prior to 2009, premiums went into the General Insurance Fund and in fiscal year 2009 moved all the new HECM endorserments to the Mutual Mortgage Insurance Fund (MMI). The study indicates that these funds are sufficient to cover losses under any scenario presented.

    • Mr. McKeon,rnrnAn actuarial report of this nature is a fancy name for a sophisticated form of a projection. The report is generally only as valid as the assumptions upon which it is based. Personally I think they are reasonable but OMB does not.rnrnHUD is not crying wolf. You keep making these baseless charges. Did you read the July 2009 GAO report? I guess not.rnrnHUD has to address the funds as directed by the President and his OMB. It must also implement what it is directed to do by Congress unless it is practically impossible or unreasonably possible.

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