An audit conducted by HUD’s Inspector General on the effectiveness of Life Expectancy Set-Asides has concluded that an estimated 1,237 HECM borrowers are at risk of seeing their LESAs depleted in significantly less time than HUD anticipated.
“If borrowers cannot make these property charge payments out of pocket, their HECM loans would default, resulting in a projected loss of $258 million to HUD,” says the report.
- In his response to the OIG’s audit findings, Deputy Assistant Secretary for Single Family Housing Matt Jones agreed to evaluate the current LESA formula to determine whether early LESA fund depletion poses a risk to HUD, but he disputed the OIG’s projected losses and the calculations that were used to arrive at the numbers.
What they’re saying: “HUD data, as of February 28, 2026, shows 90% of non-terminated HECM borrowers with a depleted LESA balance have not reported a tax and insurance default,” says Jones. “Therefore, depletion should not be categorically interpreted as a terminal event or as evidence that the set-aside formula is ineffective.”
What’s next: NRMLA will be forming a working group to gather data and develop recommendations for HUD to consider improving LESA calculations.
