RISMEDIA, November 2, 2009—The U.S. Department of Housing and Urban Development (HUD) announced that its Mortgagee Review Board (MRB) is proposing to permanently withdraw the HUD/FHA approval of Financial Mortgage USA, Inc., a Home Equity Conversion Mortgage (HECM or reverse mortgage) lender based in Honolulu, Hawaii. HUD’s MRB alleges the company failed to implement an FHA-required quality control plan; separate its lending operations from those of its affiliated insurance company; conform to prudent lending practices and properly provide borrowers with housing counseling services.
Financial Mortgage USA (FMUSA) has 30 days to respond to the Board’s proposed withdrawal and seek a hearing before an Administrative Law Judge.
In addition, the MRB is imposing the maximum $97,500 civil money penalty available against the company for these violations. A complaint seeking these civil money penalties will be served upon Financial Mortgage USA in due course and the lender will have 15 days to request a hearing on the imposition of these civil money penalties.
“FHA will not tolerate lenders who violate our rules and prey on those who depend on a reverse mortgage to continue to live independently,” said FHA Commissioner David Stevens. “FHA-approved lenders must understand that we mean business when it comes to protecting the FHA insurance fund from those who cut corners and take advantage of unsuspecting senior citizens.”
HUD’s proposed withdrawal action alleges that the company violated HUD/FHA requirements by: Failing to implement an independent Quality Control Plan, relying instead on its Vice President of Operations to conduct quality control reviews; Failing to provide a clear and effective separation between itself and Estate Planners of America, an affiliated life insurance company; and Failing to provide borrowers with a list of HUD-approved housing counseling agencies in the State of Hawaii, where they lived.
By failing to maintain a clear and effective separation between its affiliated insurance company, HUD alleges that FMUSA confused elderly borrowers who could not tell with whom they were doing business. FMUSA failed to discuss the options for receiving HECM proceeds with borrowers or simply ignored borrowers’ stated preferences in disbursing the HECM proceeds. FMUSA and its affiliate, Estate Planners of America then duped the borrowers into purchasing annuities from Estate Planners of America, which borrowers did not request and did not understand had been purchased. The Board was particularly concerned about one case in which the company steered an 88-year-old borrower into purchasing an annuity which would not mature until she reached her 104th birthday.
For more information, visit www.hud.gov.