Reverse mortgage programs, like the Federal Housing Administrations HECM (Home Equity Conversion Mortgage), enable owners aged 62 or older to withdraw some of the equity in their home to fund retirement. They are one way to enjoy the fruits of your labor and age in place in the home you love and cherish.
Beware however because when money gets involved there are un-ethical individuals looking to get at it any way they can. Reverse mortgage fraud looks to take advantage of owner equity as a way to get some quick money and leave the owner at a loss or just out the cash scammed for filling out and filing fake application forms.
Last July the United States Southern District of Florida Attorney’s General Office charged three loan officers and a title agent in a $2.5 million reverse mortgage and loan modification fraud case following an FBI investigation. In August, two of the loan officers (Louis Gendason, 42, of Delray Beach and John Incandela, 24, Palm Beach, FL) and the title agent (Kimberly Mackey, 46, of Pittsburgh, Pennsylvania) plead guilty. Sentencing is scheduled in Novemberwith the defendants facing imprisonment of up to 30 years.
The scam involved defrauding borrowers (home owners), Genworth Financial Home Equity Access, Inc. and the Federal Housing Administration (FHA). The loan officers, working for 1st Continental Mortgage, solicited individuals, ages 62 and older, from around the country to refinance their existing mortgages with a reverse mortgage loan financed by Genworth. None of the borrowers had sufficient equity to qualify for reverse mortgages but with fraudulent, altered real estate appraisals and other fake documentation the reverse mortgages were approved.
The licensed title agent and proprietor of Real Estate One Land Services, Inc. (Pittsburgh, Pennsylvania) fraudulently closed the Genworth loans without paying off the borrowers’ existing mortgage loans. The reverse mortgage money was diverted to a bank account controlled by the loan officers involved it the case.
Are there more cases like this one? I fear so. I also hope they are discovered. Should we fear reverse mortgages and avoid them at all costs? Not at all! Should we take care and seek advice when looking into a reverse mortgage? By all means yes.
Here is what you should look for to spot a possible fraud or scam:
- Reverse mortgages that look too good to be true, if you see a sizable discrepancy between the terms a lender or broker offers and the terms typically offered, consider it a warning sign of possible deception and check things out
- Broad and unqualified claims that sound false, misleading, or not clearly and prominently defined such as:
- “reverse mortgages provide income for life”
- “consumers can never lose their homes”
- Consider the names, seals, logos, and other representations of the lenders and brokers as some may look and sound like those of government agencies to create the impression that the lender or broker is part of or affiliated with a government program rather than an organization offering a loan that the client must pay back
- Pressure in any way by the reverse mortgage seller to use the reverse mortgage to buy products or services (long-term care insurance, annuities, investments, home repair, or travel)
Seek outside help if you encounter any of these warning signs.
Be sure to read up on reverse mortgages and visit NewRetirement for a whole suit of tools and information on financing retirement.
File complaints in connection to HECM loans with the U.S. Department of Housing and Urban Development online or call the department toll-free at 1-800-CALL-FHA.