HUD Needs to Provide More Guidance
Friday, 03 September 2010 08:28
An audit of the HUD’s Office of the Inspector General showed that HUD was not tracking 13,000 defaulted reverse mortgages. Claims against HUD could top $2.5 million. The audit was because the OIG found that borrowers had not paid taxes or homeowner insurance premiums. Their loans were in turn in a default status, since the HECM program requires these payments. There were also no formal procedures on foreclosure deferrals granted by the HUD.
HUD failed to guide servicers on how to proceed with defaulted loans after canceling the informal policy. Two of four servicers that were found to have 13,000 defaulted mortgages claimed that they were waiting for HUD to guide them. OIG recommends that HUD stop deferring foreclosure due to lack of payment, issue guidance to servicers, develop a plan to reduce the risk of defaults, and develop a tracking system to prevent this situation again.
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