The Department of Housing and Urban Development reached settlements with Bank of America and mortgage banking firm James B. Nutter & Co. over allegations that the lenders failed to perform due diligence in underwriting Home Equity Conversion Mortgage loans.
Both Bank of America and James B. Nutter & Co. allowed borrowers to take out more than one HECM loan in violation of program requirements, according to March 27 announcements from the HUD Office of Inspector General. The HECM program provides older homeowners with government-insured reverse mortgages in order to help them tap into home equity as a source of monthly income or credit. Borrowers can only take out loans for their principal residence and may not have more than one principal residence at a time.
Bank of America allowed a borrower to take out HECM loans on properties in Massachusetts and Florida, each of which she listed as her primary residence, according to the release.
HUD's audit found that "there was sufficient information to alert [Bank of America] and the underwriter that the second property was not the borrower's principal residence," according to the release. The Charlotte, N.C.-based Bank of America agreed to indemnify the loan, which had an outstanding balance of $206,480, in order to resolve the issue.
James B. Nutter & Co. also allowed a borrower to take out HECM loans on two different Philadelphia properties, according to the release. The Kansas City, Mo., firm agreed to indemnify the $72,166 loan and to pay a $7,500 penalty.
Neither lender admitted wrongdoing as part of the settlements, according to the releases.
An audit conducted by HUD's Office of Inspector General found that 33 borrowers had more than one loan under HECM program, according to the releases.