Beware of Reverse Mortgages - You Will Lose Your Home When the Amount Paid Out to You Exceeds the (Falling) Value of Your Home

“The Bankers Manifesto of 1892”: When through the process of law, the common people have lost their homes, they will be more tractable and easily governed through the influence of the strong arm of government, applied to a central power of imperial wealth under the control of the leading financiers.

Reverse Mortgage: Just Another Ploy to Prey on the Elderly?

February 9, 2011

ask-the-realtor.com - In my opinion, the “reverse” mortgage is just another way to prey upon the unassuming elderly. I often hear horror stories of how someone’s mom, uncle or grandfather or grandmother was taken advantage of.

Is the “reverse mortgage” necessary? Or just another instance of consumer fraud against the elderly?

There are many products out there focused on the elderly or retired and the reverse mortgage is on top of my “don’t do it” list. Although these products advise “to read documents thoroughly and carefully before signing”, I guarantee that unassuming people are just going by the “word” of someone they trust which in most cases is a close family member or friend.

My advice is to NEVER sign ANYTHING without having your attorney review the entire document and any agreement or payout information.

In most cases these older adults have their primary homes paid off and think that they will take a payout on their home for a large one-time lump sum. These homes are the backbone of their accumulated wealth for retirement.

If you are not a person that is well organized in monthly disbursement of these funds, you may also find that you fall short. Many adults are living beyond the age of 85, will these funds last?

There are more times than not in our economy where many older adults are trying to cope with common living expenses such payment of property taxes, medicines or medical treatments and the reverse mortgage sounds wonderful.

Heed my advice, if it sounds too good to be true, it more than likely is. Have your attorney review ALL documents in any investment you are considering or you may find it will cost you more money or all of your retirement funds in the end.

HUD Foreclosed on 101-year-old Detroit Woman When the Amount Paid Out to Her in a Reverse Mortgage Exceeded the Value of Her Home

HUD took control of the mortgage after the amount paid to the family exceeded the value of the house in 2006

January 21, 2012

AP - The federal government now says a 101-year-old Detroit woman it promised could move back into her foreclosed home four months ago can't return because the building's unsanitary and unsafe.

Texana Hollis was evicted Sept. 12 and her belongings placed outside after her 65-year-old son failed to pay property taxes linked to a reverse mortgage and the U.S. Department of Housing and Urban Development foreclosed on the home.

Two days later, the department said she could return. But now, HUD said it won't let Hollis move back in because of the house's condition. She had lived there about 60 years.

"Here I am, 100 years old, and don't have a home," Hollis said, rounding off her age. "Oh Lord, help me."

Department spokesman Brian Sullivan told The Detroit News (http://bit.ly/yoTW9X ) that an inspection determined the house "was completely unsuitable for a person to live in."

"We can't allow someone to live in that (atmosphere) now that we are essentially the owners of the property," Sullivan said. "The home isn't safe; it's not sanitary. It's certainly not suitable for anyone to live in, especially not a 101-year-old mother."

HUD doesn't want to pay to fix up the house, but Sullivan said the department's seeking other agencies that might help with the work and get Hollis back into her home.

"We're not giving up," Sullivan said. "We're talking with anybody and everybody about solutions to this situation, but the condition of the property is a challenge."

After hearing about her longtime friend's eviction, Pollian Cheeks, 68, offered Hollis a room at her home within a mile of Hollis' house. Hollis, who once taught Cheeks in Sunday school at St. Philip's Lutheran Church, agreed to the invitation and has been staying at Cheeks' house in the meantime.

"Polly's just as nice to me as anybody could be. She goes out of her way to help me," Hollis said, holding back tears. "It's just like living at home, but it's not my home."

Hollis's son took out the reverse mortgage for the $32,000 assessed value of the property, an option that HUD permits for the elderly. HUD took control of the mortgage after the amount paid to the family exceeded the value of the house in 2006.

Who is securing all of these reverse mortgages? The following data comes from HUD, or US Department of Housing and Urban Development, studies, and provides information that is current to April 2008. The data is based on HECM, or Home Equity Conversion Mortgages, which constitute 90% of all reverse mortgages secured overall.

Current HCEM Rate: 3.57%

Highest Rate (since 2001): 6.77%

Lowest Rate (since 2001): 2.45%

The Typical HECM Borrower:

Age: 75
Home Value: $289,000
Principal Limit: $159,000
Single Male: 17%
Single Female: 44%
Couples: 39%
HECMs Lasting Under 7 Years: 60%

*Percentages indicate number of specified borrowers versus total HECM borrowers

Two Sentenced to Federal Prison for Reserve Mortgage Fraud Scheme

November 4, 2011

Sun Sentinel - A loan officer and a title agent were sentenced to federal prison after earlier pleading guilty to participating in a $2.5 million reverse and loan modification scheme, U.S. Attorney Wifredo A. Ferrer announced in Miami.

Loan officer Marcos Echevarria, 29, of Palm Beach, will serve 24 months in prison followed by five years of supervised release, decided U.S. District Court Judge William P. Dimitrouleas.

He sentenced title agent Kimberly Mackey, 46, of Pittsburgh to 60 months in prison and five years of supervised release.

Restitution was ordered in the amount of $1,654,805.36.

Two other men, who also pleaded guilty in the scheme -- Louis Gendason, 42, of Delray Beach, and John Incandela, 24, of Palm Beach -- will be sentenced Dec16.

Two Members of Reverse Mortgage Fraud Ring Plead Guilty; Fraudsters Profited from FHA-Insured Reverse Loans Intended to Benefit Seniors

April 8, 2010

FBI.gov - Kelsey Torrey Hull, 38, and Jonathan Alfred Kimpson, 27, both of Lithonia, Georgia, pleaded guilty today in federal district court to a conspiracy to defraud reverse mortgage lenders and the Federal Housing Administration (FHA) insurer of the loans. Hull pleaded guilty to an additional bank fraud charge involving mortgage fraud, and Kimpson pleaded to an additional identity theft charge.

U.S. Attorney Sally Quillian Yates said,

“These defendants plead to profiting from the corruption of a FHA-insured program designed to assist seniors with either cash for equity in their home or with funds toward the purchase of a home. These defendants changed real estate records and used other fake documents to place seniors in houses worth only a fraction of the amounts represented, and divert loan proceeds to themselves. With these prosecutions, we have taken a significant step to stop this type of crime.”

Inspector General Kenneth Donahue, U.S. Department of Housing and Urban Development (HUD) said,

“HUD’s Home Equity Conversion Mortgage Program was created to help senior citizens find greater financial security through FHA-insured reverse mortgage loans. The HUD Office of Inspector General will aggressively investigate those who would prey on America’s senior citizens through reverse mortgage fraud, and encourages anyone having knowledge of such schemes to contact our HUD Hotline at 1-800-347-3735.”

According to U.S. Attorney Yates, the charges, and other information presented in court: Reverse mortgages were designed to assist with the financial security of seniors, ages 62 or older. There are two types of reverse mortgages. In a “refi-reverse,” the senior homeowner receives money from the lender for a portion of the equity in the home they own.

In a “purchase money reverse,” the senior receives money from the lender toward the purchase of a new home. Under both types of reverse mortgages, the senior does not have to repay the lender for as long as the senior lives in the home. However, refi-reverse mortgages fund only a percentage of the property value, requiring significant equity to remain in the property, and purchase money reverse mortgages require a significant down payment from the senior borrowers to establish equity in the property. The equity must remain in the home to cover loan principal, interest, insurance, and servicing costs upon FHA sale of the property when no longer occupied by the senior.

Hull and Kimpson took advantage of the system by faking the required seniors’ down payments needed to qualify for the FHA-insured purchase money reverses. The defendants did this through bogus “gift” letters from “relatives” in amounts between $50,000 and $105,000. They also used fake HUD-1 settlement statements purporting to document the sale of the senior’s non-existent assets. All down payments were actually supplied by the defendants, not the senior citizens, to be returned to the defendants upon the reverse loan closings, along with profits substantially in excess of the true sales prices of the properties. The return of funds to the defendants were disguised as either seller proceeds or lien payoffs. All such fraudulently obtained reverse mortgages included inflated appraisals.

Kimpson’s plea to aggravated identity theft relates to his use of the stolen identity of realtors and their password to falsify Georgia Multiple Listing Service (MLS) records to create fake property listings and sales at inflated amounts in support many of the fraudulent appraisals.

Hull also committed refi-reverse fraud by transferring properties into seniors’ names to obtain refi-reverse mortgages at fraudulently inflated amounts. He thereby avoided the down payment requirement for purchase money reverses, and was able to divert loan proceeds to his shell companies, disguised as lien payoffs.

Hull was charged by a criminal information on Feb. 25, 2010. Hull could receive a maximum sentence of up to 30 years in prison and a fine of up to $1,000,000 on each of the conspiracy and bank fraud counts. Kimpson was indicted on Feb. 24, 2010. Kimpson could receive a maximum sentence of up to 30 years in prison and a fine of up to $1,000,000 on the conspiracy count, as well as a mandatory consecutive sentence of two years in prison and a fine of up to $250,000 on the aggravated identity theft charge. In determining the actual sentence upon any convictions in these cases, the court will consider the U.S. Sentencing Guidelines, which are not binding but provide appropriate sentencing ranges for most offenders.

Sentencings for both Hull and Kimpson are scheduled for July 16, 2010, beginning at 2 p.m., before U.S. District Judge Julie E. Carnes.

These mortgage fraud cases are prosecuted federally as part of President Barack Obama’s Financial Fraud Enforcement Task Force.

These cases are being investigated by Special Agents of the HUD-Office of Inspector General and the Federal Bureau of Investigation (FBI). Assistance in this case is being provided by the U.S. Department of Treasury Financial Crimes Enforcement Network (FINCEN) and the Georgia Multiple Listing Service.

Assistant U.S. Attorney Gale McKenzie is prosecuting the cases.

How NOT to Use Reverse Mortgage Money

September 4, 2008

reversemortgagehelp.com - Reverse mortgages are unique types of loans that are based specifically on the borrower’s eligibility. To be eligible for a reverse mortgage, the homeowner must:

• Be at least 62 years of age
• Own the property outright or have a low enough mortgage balance that the mortgage can be paid in full at closing using proceeds from the reverse mortgage loan
• Use the property as a full-time, permanent residence
• Receive third-party financial counseling from a Department of Housing and Urban Development-approved counseling agency

Reverse mortgages include no income or medical requirements, such as credit checks, income verification, or physicals. Many seniors qualify for reverse equity mortgages; however, what if you are a senior homeowner who qualifies for a reverse equity mortgage, but doesn’t necessarily need one?

The following example serves as a guideline for senior homeowners who are contemplating a reverse mortgage loan for reasons other than home improvement, paying off their remaining mortgage, or helping with day-to-day expenses.

QUESTION: My idea is to take out a reverse home mortgage now, deposit 25 percent in a liquid account to draw on if needed and invest 75 percent in an insured account with high interest. Is this a good plan?

ANSWER: No. If you don’t need the reverse home mortgage money yet, there is no reason to obtain one now and start accruing interest on money you really don’t need. However, this might be a good time to shop around among reverse mortgage lenders to compare the FHA, Fannie Mae, and Financial Freedom Plans.

If you want to arrange a reverse mortgage now, the popular credit line alternative might be the best option. The credit line makes funds available when you need them in the future, such as for a new roof or a trip around the world. While interest doesn’t accrue until you start using the money, not using the available money is an expensive choice because the upfront loan fees and other costs begin accruing interest whether you use any funds or not.

Read More...