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 contrary to program residency requirements, 37 borrowers were not living in the property associated with the loan and were renting the property to participants in HUD’s Section 8 Housing Choice Voucher program. Renting the properties to Section 8 program participants violated program requirements because HUD requires borrowers to reside in the mortgaged residence as their principal residence. We referred the violations to HUD’s Office of Program Enforcement for action.
In May 2006, one borrower obtained a HECM loan on a property that he owned in St. Charles, MO. The borrower certified in writing on at least three occasions that the home was his principal residence. However, he was renting the property to a participant in HUD’s Housing Choice Voucher program when he made the certifications. His actions violated HUD’s principal residency requirements. After HUD’s Office of Program Enforcement sent the borrower a demand letter, he admitted that he did not reside in the property as his principal residence when he submitted the certifications. After negotiations with HUD, the borrower agreed to pay $3,000, or 12 monthly payments of $250, to settle the matter. The borrower made the first settlement payment in January 2015.