New York Attorney General Eric Schneiderman is investigating practices related to the servicing of reverse mortgages at Financial Freedom, a part of OneWest Bank, and at Champion Mortgage, a unit of Nationstar Mortgage, as the state further heightens its recent focus on reverse mortgages, an article in The Wall Street Journal by Annamaria Andriotis stated.
“The inquiry, which is in early stages, is examining whether businesses employed tactics that pushed elderly borrowers into foreclosure,” the article sated.
The article noted that a spokesman for CIT, which now owns OneWest and Financial Freedom, declined to comment.
A Nationstar Mortgage spokesperson commented on the WSJ piece stating that to date, Nationstar has not been made aware of any inquiry from the New York Attorney General’s office in regards to Champion, its reverse mortgage servicing product.
“If we are made aware, we will continue to make good on our commitment to working constructively with all regulators and elected officials to ensure our industry serves the best interests of American homeowners. Our top priority is balancing a robust culture of compliance with caring customer service,” they said.
Nationstar added that more than 90% of its Champion customers in New York are current on their taxes and insurance obligations. “We’re actively exploring solutions for those still struggling and have been able to help three quarters of past due customers avoid foreclosure with repayment plan for their taxes and insurance,” they said.
The timing of the investigation is notable since earlier this month the state of New York introduced plans to increase the regulations surrounding reverse mortgages in the state. New York Gov. Andrew announced a series of new laws that would add financial protections for the state’s senior citizens.
Included among those proposals are new rules for reverse mortgages, which are similar to a traditional mortgage in that it is a loan with the borrower’s home as collateral, but unlike a traditional mortgage, borrowers do not have to repay the loan as long as they remain in their home.
Reverse mortgages are only available to borrowers that are 62 or older and either have already paid off their forward mortgage or be able to pay it off with proceeds from the reverse mortgage.
And this is the second time in the last year that New York has come forward saying that it’s investigating reverse mortgage lenders.
Back in July 2016, the New York Department of Financial Services was reportedly launching an investigation into the reverse mortgage divisions of Nationstar Mortgage and Walter Investment Management Corp.
According to an article in the New York Post, the NYDFS was investigating Reverse Mortgage Solutions, a division of Walter Investment, and Champion Mortgage.
And in addition to New York’s increased scrutiny of reverse mortgage lenders, the article in The Wall Street Journal stated that the examination of Financial Freedom dates back to 2012, when Treasury Secretary nominee Steven Mnuchin was chairman of OneWest. OneWest is now a subsidiary of CIT Group.
In response to the news, Mnuchin spokesman Barney Keller said in a statement that was also sent to HousingWire, “We’re sure any ’investigation’ is about nothing more than politics.”