Evaluation of Home Equity Conversion Mortgage Loan Payments Made After Death of Borrower

Date Published: 
Wednesday, August 17, 2011
Publication/Report Type: 
Inspections & Evaluations
Report Number: 
IED-11-004R
Program Area(s): 
Single-family Housing
State: 
District of Columbia
Summary: 

HUD OIG conducted an evaluation of Home Equity Conversion Mortgage (HECM) Loan Payments Made After Death of Borrower. A HUD OIG query of the HUD Single Family Data Warehouse (SFDW) disclosed that servicers of home equity conversion mortgages  were making payments to borrowers after the borrowers’ date of death.  Therefore, the Inspections and Evaluations Division conducted a review to validate the HECM data and to determine whether such payments resulted in a financial loss to HUD.

We found that although scheduled payments were not made after the date of death of the borrower they were incorrectly recorded in HUD’s Insurance Accounting Collection System (IACS) by lenders. Additionally, loan proceeds from the sale of property and claims paid by HUD were not credited to HECM loan balances in a timely manner, resulting in inaccurate information being reported in SFDW and unreliable financial data being used by HUD. While we noted a few instances in which unscheduled advance payments were made after the death of the borrower, which resulted in overstated claims paid by HUD, we do not believe this is a systemic problem.  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.

We believe that the timely reconciliation of HECM loan payment data by lenders and a more comprehensive policy of detecting and reporting fraud will benefit the HECM program.

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