Monday, March 31, 2014

Bank of America settles reverse mortgage claims with HUD

Bank of America has reached a settlement with the U.S. Department of Housing and Urban Development over claims that the bank failed to detect that a borrower did not qualify for a government-backed reverse mortgage loan.

Under terms of the settlement, announced Monday by HUD’s inspector general’s office, the Charlotte-based bank will cover any future losses on the loan, protecting HUD against any losses. The bank did not admit wrongdoing by entering into the settlement.

The settlement followed an audit by the inspector general’s office, which reviewed HUD’s oversight of the reverse mortgage program.

Among the findings was one woman who obtained a reverse mortgage from Bank of America even though she already had a reverse mortgage for a second property. That violated HUD’s rules barring reverse-mortgage borrowers from owning more than one principal residence at a time.

Bank of America had “sufficient information” to determine that the second property was not the borrower’s principal residence, the inspector general’s office said in a memo.

The settlement was reached in December, according to a bank spokesman.

Bank of America exited the reverse mortgage business in 2011 to focus on its core mortgage operations.