One notable exception, as per the online database, involves a settlement between HUD and MetLife Home Loans in 2018. This settlement stemmed from allegations that the lender, along with the son of a reverse mortgage borrower, failed to comply with HECM loan requirements from the Federal Housing Administration (FHA).
Following a loan review conducted in 2017, HUD informed MetLife and the borrower’s son about their potential liability under the Program Fraud Civil Remedies Act of 1986. This was due to causing a false claim to be made regarding the eligibility of an FHA HECM loan. MetLife, as the underwriter of the loan, failed to ensure that the signatories had the legal authority to execute it.
Specifically, the OIG pointed out that the power of attorney used by the borrower’s son required both his sister’s and his own signature. As part of the settlement, MetLife paid $4,000 to HUD, and the borrower’s son paid $1,500 to close the matter.
However, an outstanding issue remains concerning the enforcement of an indemnification agreement to prevent a potential loss of $95,769 to HUD. This amount represents what MetLife owes HUD for indemnifying and holding the agency harmless for any losses incurred in connection with the loan.
In January 2012, MetLife exited the forward mortgage business. Despite this, the company continued to operate as a reverse mortgage lender for a brief period. However, just four months later, MetLife exited the reverse mortgage business and sold its portfolio to Nationstar Mortgage. MetLife was the first to implement a financial assessment for reverse mortgage borrowers in its retail and wholesale divisions to prevent tax and insurance defaults. Nonetheless, the company later suspended the assessment indefinitely.
Out of the four open HECM-related issues according to HUD OIG, three are linked to the program’s principal residency requirements, which mandate that a HECM borrower must reside in the home as their primary residence.
The OIG first made a recommendation in 2014, followed by another less than a year later. The goal was to enhance the integrity of HUD’s single-family insurance programs due to residency issues identified in previous HECM audits. An audit revealed that a significant number of borrowers were not living in the properties associated with their loans but were receiving rental assistance for a different address simultaneously.
The OIG recommended that HUD implement controls to prevent borrowers from violating residency requirements by participating in the Voucher program concurrently. This included cross-referencing voucher recipient data with that of HECM borrowers to ensure compliance.
A subsequent review found that the majority of loans reviewed did not comply with residency requirements due to receiving rental assistance from HUD’s multifamily programs at a different address. The lack of controls in place posed a risk to the FHA’s insurance fund.
However, a follow-up review in December 2021 indicated that HUD had implemented some corrective actions but had not fully addressed all recommendations. One of the ongoing recommendations from prior years was not implemented due to high staff turnover.
As of 2021, HUD’s open recommendation is for the Office of Single Family Housing to collaborate with other HUD offices to ensure that appropriate controls are in place to prevent HECM borrowers from violating residency requirements.