Bank of America Corp., which has been out of the reverse mortgage business for years, was among two companies to settle charges of violating guidelines on government-insured reverse mortgages.
Its 2006 acquisition of Reverse Mortgage of America and its 2008 acquisition of Countrywide Financial Corp. provided BofA with a platform for reverse mortgage lending.
By 2010, the Charlotte, N.C.-based company was generating Federal Housing Administration endorsements on home-equity conversion mortgages at an annual rate of 13,000 — making it the second-biggest HECM lender that year behind Wells Fargo Bank, N.A.
But by early 2011, BofA had made the decision to exit the reverse mortgage business.
Now, three years later, the Department of Housing and Urban Development’s Office of Inspector General has reported that Bank of America, N.A., violated HUD’s policy of limiting HECMs to one per borrower. The policy ensures that all properties are owner occupied.
“One borrower obtained two HECM loans on properties that she owned in Massachusetts and Florida,” the notice stated. “For each loan, she certified that the underlying property was her principal residence. Her actions violated HUD’s principal residency requirements because she owned both properties at the same time.”
The report said that BofA and its underwriter weren’t diligent in the underwriting process.
BofA has agreed to settle with HUD by indemnifying the $206,000 loan.
In all, the OIG said it found 33 borrowers with more than one HECM.
Also among the 33 was a borrower who obtained an HECM on two Philadelphia properties. In that case, James B. Nutter & Co. and its underwriter were the ones being called “not duly diligent in underwriting.”
Like BofA, Nutter & Co. agreed to indemnify HUD on the $72,000 loan. In addition, the Kansas City, Mo.-based company agreed to pay a $7,500 penalty.
Neither BofA nor Nutter & Co. admitted liability or fault.
