The Federal Housing Administration (FHA) on Tuesday announced that it has published new Frequently Asked Questions (FAQ) information specifying how Secretary-held Home Equity Conversion Mortgage (HECM) loans can be paid off, reminding the industry and the public that a wire transfer for such a transaction is not permitted.
“All payoffs for Secretary-Held HECMs and Partial Claims must be sent to HUD’s Loan Servicing Contractor, Novad Management Consulting, in the form of certified funds, such as a cashier’s check,” FHA INFO #20-92 reads.
Notices or literature that contain instructions to settle these loans via wire transfer could be a sign of fraudulent activity, and must be reported to the agency immediately, the notice goes on to say.
“FHA does not accept wire transfers to payoff Secretary-Held HECMs or Partial Claims,” the notice reads. “Any Secretary-Held HECM or Partial Claim payoff statement containing wiring instructions is fraudulent. The recipient of any Secretary-Held HECM or Partial Claim payoff statement that contains wiring instructions should immediately contact the FHA Resource Center by email or by phone […] to report that a possibly fraudulent payoff statement has been received and to obtain a correct payoff statement.”
Wire fraud can be a particularly difficult scam to repair since once a party to a transaction participates, the loss of funds is immediate and very difficult to recover according to Adan Gutierrez, assistant vice president and former client solutions manager at Allegiant Reverse Services.
“The same technology that has helped us to work faster and more securely has opened a whole new application for scammers,” he said in a 2018 webinar on the topic. “In particular, wire transfer funds are what’s targeted because they are an immediate transfer of goods. […] By the time someone catches the fraud, the money is already gone.”
Novad Management Consulting has been FHA’s reverse mortgage servicing contractor since 2014. Recent indications are that the agency is aiming to find a new servicing contractor to help fix remaining back-end loan issues, according to recent comments from U.S. Department of Housing and Urban Development (HUD) and FHA personnel.
Read the FHA INFO Notice at HUD.