HECM lenders and originators need to be increasingly proactive about reporting potential fraud and aware of how best to identify and report it if they want to mitigate potential indemnification and compliance risk, a special agent from HUD IG's office told attendees at a National Reverse Mortgage Lenders Association meeting Tuesday.
The special agent, Jason Abend, said at the group's Eastern regional meeting in New York that the “single best way to reduce fraud” is to make sure to send third parties to visit borrowers to validate them.
Abend, who said his office “follows anywhere HUD's money goes” in the New York/New Jersey region, also advised that-due to the limits of his office's resources and those of certain other officials when it comes to reporting suspected fraud-HECM lenders may want to put a priority on visiting the local prosecutor's office when they do so.
Federal prosecutors, for example, have a cost limit most of the loans made under the Department of Housing and Urban Development's Home Equity Conversion Mortgage program don't meet, he said.
Abend also reminded attendees that certain nonbank residential players face additional responsibilities under the final Anti-Money Laundering and Suspicious Activity Report rule issued last month through the Treasury's Financial Crimes Enforcement Network, which has an April 16 effective date and Aug. 13 compliance date.
Among other things the rule requires those covered by it to file SARS within 30 days of detection of a suspicious incident. It also requires certain residential nonbanks have written AML policies, a designated AML compliance officer, ongoing training for staff and testing by an outside third party.
