OIG Audit Report Finds HECM Underwriting “Adequate”

image The US Department of Housing and Urban Development’s Office of Inspector General audited HUD’s oversight of FHA’s reverse mortgage program and found that it generally performed adequate reviews of loans with the exception of four loans reviewed said the OIG’s report. 

One of the deficiencies found that the lender used the incorrect interest rate in determining the initial principal limit for the HECM loan.  According to the report:

The lender used the interest rate in an expired lock-in agreement instead of determining whether there were any adjustments to the rate. This error resulted in the lender’s misapplying the interest rate of 6.09 percent rather than the 6.661 percent interest rate that was in effect at the time the loan closed.  The misapplication of the interest rate added $11,742 to the borrower’s net principal limit amount.

Other deficiencies found included borrowers where lenders included fees in the borrowers closing costs that were not reasonable or customary.  Both borrowers were charged $75 for negative endorsement and $250 for reverse mortgage endorsement fees.

Audit Report No.: 2009-CH-0003

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