HUD May Withdraw FHA Approval from Reverse Lender
The Department of Housing and Urban Development (HUD)’s Mortgagee Review Board proposed the agency revoke the Federal Housing Administration (FHA) approval of a Hawaii-based reverse mortgage lender. The board is proposing HUD permanently withdraw the HUD and FHA approval of Financial Mortgage USA, a Honolulu-based home equity conversion mortgage (HECM) lender, because the company allegedly 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. The board is imposing the maximum $97,500 civil money penalty available against the Financial Mortgage USA for the alleged violations through a civil lawsuit. The lender has 15 days to request a hearing on the fine and 30 days to respond to the board’s proposed approval withdrawal before a judge. “FHA will not tolerate lenders who violate our rules and prey on those who depend on a reverse mortgage to continue to live independently,” FHA commissioner David Stevens said. “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.” According to the board, Financial Mortgage USA does not have a quality control plan, instead relying on its vice president of operations to conduct its quality control reviews and does not provide a “clear and effective separation” between itself and Estate Planners of America, an affiliated life insurance company. In addition, the company allegedly failed to provide borrowers with a list of HUD-approved housing counseling agencies in the Hawaii, the board and HUD said. The violations, the board said, confused elderly borrowers that could not tell who they were doing business with. The company failed to discuss options for receiving the reverse mortgage proceeds with customers or ignored borrowers’ stated preferences in disbursing the funds. The company then allegedly lured borrowers into purchasing annuities from its life insurance company, “which borrowers did not request and did not understand had been purchased,” HUD said. In one case, HUD said, an 88-year-old borrower was lured into purchasing an annuity that would not mature until she reached her 104th birthday. Phone listings for Financial Mortgage USA were not in service and the company could not be immediately reached for comment. Write to Austin Kilgore.