Short answer

• Simply failing to notify the reverse-mortgage servicer of the Borrower’s death is typically a contract/servicing problem (the loan is already “due and payable” upon the triggering event), and it can lead to default/foreclosure and mounting interest/fees.
• Actively hiding the death, such as forging occupancy certifications or submitting false documents, can lead to criminal charges and federal penalties, highlighting the importance of transparency for heirs and legal professionals.

1) What happens if heirs don’t notify the lender and let the balance grow for years?  Recognizing the obligation to inform the lender helps heirs fulfill their legal responsibility and avoid default and legal complications, emphasizing their duty to act promptly.

A. The loan is already “due and payable” at death (for HECMs)

For an FHA-insured HECM, the loan becomes due and payable when the last surviving Borrower dies (or no longer occupies as a principal residence, or sells).

B. Interest and charges continue to accrue

Even if no one tells the servicer, the loan balance continues to accrue interest/fees under the contract—so waiting “10 years” generally just erodes or eliminates remaining equity and can make resolution more difficult.  (The due-and-payable event has occurred; non-notification doesn’t stop accrual.)

C. The servicer will typically discover the death eventually

HECM servicers must obtain annual occupancy certifications and maintain procedures around occupancy verification.  If those certifications aren’t returned—or are returned inconsistently—it often triggers escalation.

D. Property obligations don’t pause

HUD materials emphasize that property taxes and insurance remain the estate’s responsibility until title transfers; failure to maintain them can result in default and foreclosure risk, regardless of the timing of death notification.

2) Is that “defrauding a federally related lender”?

The key distinction: silence vs. deception

Fraud (civil or criminal) usually requires deception/intent—not just delay.  The most legally dangerous facts are affirmative misrepresentations, such as:

• Signing or submitting false occupancy certifications asserting that the Borrower is alive or occupying the home can result in criminal and civil penalties, underscoring the legal importance of honesty for compliance and the protection of interests.
• Making false representations to the servicer or FHA-insurance process to stall “due and payable,” foreclosure, or repayment timelines.hud+1

By contrast, not calling the lender (without more) is more often treated as:

• a breach of loan terms/servicing noncompliance, and
• a situation that accelerates collection/foreclosure, rather than automatically becoming a prosecutable “fraud.”

That said, if heirs had a reasonable belief or were unaware of their obligation to disclose, and did not engage in concealment, what legal defenses or mitigating factors might apply to them?

3) Why can this become federal (especially for HECMs)

A. HECMs involve FHA/HUD, which pulls in federal statutes

A HECM is FHA-insured, and HUD materials explicitly state that post-death handling and timelines are part of the FHA program, thereby clarifying federal oversight and procedures.

B. False statements to federally connected mortgage lending can implicate 18 U.S.C. § 1014

 The federal statute 18 U.S.C. § 1014 criminalizes knowingly making false statements “for the purpose of influencing” the action of enumerated entities, including the Federal Housing Administration, and it also covers “a mortgage lending business” and entities that make “a federally related mortgage loan” (as defined by RESPA).

 Practical translation: If someone lies in a way that influences servicing, FHA insurance, foreclosure timelines, or certifications tied to an FHA-insured HECM, the matter can migrate into federal false-statement territory depending on facts and intent.

C. A “scheme to defraud a financial institution” can implicate 18 U.S.C. § 1344

 Federal bank fraud (18 U.S.C. § 1344) requires a scheme to defraud a financial institution or to obtain its property “by means of false or fraudulent pretenses.”
Whether a reverse-mortgage servicer/owner qualifies as a “financial institution” for § 1344 purposes can depend on the entity and structure.  Hence, the cleaner federal hook in many mortgage-servicing deception scenarios is often § 1014 (false statements) or other statutes—again, fact-specific.

4) What the heirs should do instead (risk-reducing, legitimate path)

 For HECMs, the CFPB explains that, after the Borrower (and any co-borrower or eligible non-borrowing spouse) dies, the loan becomes due and payable, and heirs generally must decide whether to sell, repay/refinance, or surrender; timelines may include short initial deadlines with possible extensions.

Best practice steps (legitimate):

·         Notify the servicer and provide a death Certificate through the estate’s representative.

·         Ask for the “due and payable” packet and the servicer’s extension process.

·         Keep taxes/insurance current while the estate decides (to avoid compounding defaults).

·         If anyone is tempted to “buy time” by signing occupancy forms after death: don’t—HUD’s certification language explicitly warns about penalties for false statements.

18 U.S.C. § 1014 — “False statements to influence a lender or federal housing/financial agency”

18 U.S.C. § 1014 is a federal criminal statute that makes it a felony to knowingly make a false statement or report, or willfully overvalue land/property/security, for the purpose of influencing the action of certain federal agencies (including the Federal Housing Administration) and a wide range of financial institutions and mortgage lenders in connection with a loan or related credit transaction. 

The core idea (plain English)

 If someone lies (or inflates collateral value) to affect a lender’s or covered agency’s decision about a loan approval, renewal, modification, collection, extension, etc., that conduct can be prosecuted under § 1014.

What the statute actually says (short excerpt)

Here’s the key language (paraphrased in structure but faithful to the text):

Whoever knowingly makes any false statement or report,

or willfully overvalue any land, property, or security,

for the purpose of influencing in any way the action of

[listed agencies/institutions… including FHA, FDIC-insured institutions,

mortgage lending businesses, and entities making federally related mortgage loans]

upon any application, commitment, loan, or related transaction…

shall be fined up to $1,000,000 or imprisoned for up to 30 years, or both.

 This scope and penalty framework is set forth directly in the U.S. Code at § 1014.

Who/what is covered?

Section 1014 lists many covered targets, including (among others):

• Federal Housing Administration (FHA) (explicitly named).
• FDIC-insured banks and other federally insured/regulated institutions.
• A “mortgage lending business” and any person or entity that makes, in whole or part, a “federally related mortgage loan” (a RESPA-defined term referenced in the statute).

Why that matters for reverse mortgages (HECMs): HUD’s HECM (reverse mortgage) program uses occupancy certifications that include a federal warning citing § 1014 as a statute that may apply to false statements.

What the government generally must prove (common elements)

Courts and DOJ guidance describe § 1014 as focusing on:

·         A false statement/report (or willful overvaluation of property/security).

·         Made knowingly (aware it’s false)

·         Made for the purpose of influencing the action of a covered agency/institution in connection with a covered loan/credit transaction.

Note: The statute is written broadly—“for the purpose of influencing in any way”—so it can apply even if the attempt to influence didn’t succeed.

Two critical legal clarifications from the Supreme Court

1) Materiality is NOT an element (United States v. Wells, 1997)

The Supreme Court held that “materiality of falsehood is not an element” of § 1014 (i.e., prosecutors don’t have to prove the lie was “material” as a separate element).cornell

2) Misleading-but-true statements are NOT covered (Thompson v. United States, 2025)

In 2025, the Supreme Court unanimously held that § 1014 does not criminalize merely misleading statements, even if they are not literally false.  In other words, § 1014 targets false statements—not all “half-truths” if they’re literally true.

Practical examples (how § 1014 shows up in real life)

These are common fact patterns that can trigger § 1014 exposure:

• Mortgage applications: falsifying income, assets, employment, occupancy, or debts to get approved.
• Collateral/value inflation: willfully overstating property value or security to influence loan terms or approval.
• Servicing/collections: giving a false statement to influence an FDIC-related servicer’s action on a loan was the basic setup in Thompson.
• HECM occupancy certifications: HUD’s guidance includes a warning that false statements in annual occupancy certifications may result in criminal/civil penalties, citing § 1014.

Penalties

The statute authorizes penalties of up to $1,000,000 in fines and up to 30 years’ imprisonment, or both.

Why did this statute come up in your reverse mortgage scenario?

If heirs (or anyone) affirmatively submit false information to a HECM servicer—especially on things like occupancy certifications that are explicitly tied to federal program compliance—§ 1014 is one of the federal statutes that can be implicated.

But whether a specific situation is criminal depends heavily on what was said or signed, who said it, and intent—so it’s very fact-specific.

The one-sentence difference

• 18 U.S.C. § 1014 targets individual false statements (or willful overvaluation of collateral) made to influence a covered lender or federal agency in connection with a loan/credit action.
• 18 U.S.C. § 1344 targets a scheme or artifice to defraud a financial institution or to obtain property under its control by fraud (i.e., “bank fraud”).

Side-by-side comparison (high level)

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