Reverse Mortgage Fraud: The Next Frontier

Fraud in this industry is something that I have mused about for a long time. A look at the housing mess sounds a clarion call for those of us in this great industry to be on the look out for irregularities in loan files. Furthermore, we need to educate our clients to protect their vital information.

A report in yesterday’s Investment News describes how mortgage fraud has flourished in this country. In fact, mortgage fraud suspicious- activity reports filed with the Financial crimes Enforcement Network has doubled since 2005.
The two types of fraud illustrated in this article are fraud for housing and fraud for profit. While the former is used to obtain a higher mortgage amount than one could actually qualify for, the latter technique usually involves the stealing of one’s identity. Both of these insidious techniques, can cause serious harm to the reverse mortgage industry. While income and employment history is not germane in the underwriting process, credit history could be.

Too many seniors are all to willing  to provide their Social Security number, driver’s license or bank account information. Sometimes we have to protect our clients from themselves. That is why, I believe that it is quite important to meet the client in person. I find the two step approach helpful. I believe in a get acquainted meeting. In this meeting I offer my credentials. And of course we get to know each other. I bring no paperwork. It is imperative that the client have the utmost comfort level upon meeting me. If, on the other hand they prefer to work with someone else, I wish them all the best and suggest that they proceed  with due caution. You see, I believe that obtaining a reverse mortgage is like a parachute jump. The client has one opportunity to get it  right the first time.

Those clients that never meet the LO, or a representative of the company need to check out that company thoroughly.  In my mind, that is like having surgery and never having the opportunity to meet the doctor.

Comments

[Jim Veale]

Mr. Haber,

One of the more interesting questions Senator McCaskill asked the FHA representative in the hearing on Reverse Mortgages was if there any counselors who are convicted felons. I was hoping to hear a more important follow up question -- if the representative was aware of any originators who are convicted felons. As our industry grows without significant regulatory oversight of originators the question becomes -- are we setting ourselves up for our own demise. Imagine the potential effects of headlines about a senior who suffered significant financial loss through identity theft by an originator who was previously convicted of identity theft, or senior financial abuse.

As to your point of the need for at least one face-to-face meeting between the borrower and originator, I cannot agree with you more. It came as a significant surprise when the vast majority of the attendees at the NRMLA Western Regional Conference in 2007 supported the HUD proposal to end face-to-face required meetings. It came as a bigger surprise that the vote was almost a tie at the NRMLA Eastern Regional Conference some weeks later. I believe that at least one face-to-face meeting between the originator and the borrower should be required before a FHA Case Number is issued.

Jim Veale