Unreported cases of HECM fraud led the Office of Inspector General for the Department of Housing and Urban Development to recommend that timely reconciliation of HECM loan payment data by lenders and a more comprehensive policy of detecting and reporting fraud will benefit the HECM program.
A report released by the OIG in August sought to find whether payments made to borrowers after the borrowers’ date of death were resulting in an financial loss to HUD.
While the OIG found that scheduled payments were not made after the borrowers’ dates of death, it did find that those payments were incorrectly recorded in HUD’s Insurance Accounting Collection System by the lenders. The review also found inaccurate information being reported and unreliable financial data being used by HUD.
“During our review, we also noted instances in which HECM loan servicing files contained indications of suspicious or potentially fraudulent transactions; however, there was no evidence that such matters were referred to HUD for further action,” the report stated. “Lender officials stated that HUD’s guidance in this area was too broad and that specific fraud indicators should be included in any future guidance.”
Of the 29 loans OIG sampled, six contained indicators of suspicious or potentially fraudulent transactions which were not follow up by the servicer or referred to HUD, OIG wrote.
That activity included cases where unscheduled payments were requested by Powers of Attorney or people not on the loan documents, and cases where the borrower’s signature on such requested did not match up with signatures on previous loan documents.
Written by Elizabeth Ecker