FinCEN Director: Agencies Working to Reduce Reverse Mortgage Fraud

In a presentation to the Mortgage Bankers Association’s National Fraud Issues Conference this week in Fort Lauderdale, James Freis, Jr., director of the Financial Crimes Enforcement Network (FinCEN) with the Treasury Department spoke on the agency’s efforts relating to reverse mortgage fraud.

Under the general topic of residential mortgage fraud, Fries discussed today’s economic climate and an increasing risk regarding HECM loan fraud.

“The difficult economic environment and associated financial uncertainty has resulted in an increasing number of senior citizen homeowners accessing equity in their homes through reverse-mortgage programs as a way to ease their financial situation,” he said. “As a result, senior citizen homeowners who use equity conversion programs to meet their financial needs are increasingly becoming a target for scammers.”

Freis outlined an April 2010 advisory that highlighted fraud schemes as well as red flags for fraudulent activity related to HECMs, and provided an example of fraud in a reverse mortgage case:

“The defendants faked down payments and arranged inflated appraisals to create bogus equity of up to $100,000 in the properties securing these reverse mortgage loans, while diverting loan proceeds to themselves.  One defendant used the stolen identities and passwords of realtors to increase MLS listing and sale prices in support of inflated appraisals to create the substantial equity required to remain in the properties.  Both defendants pled guilty on April 8, 2010, in separate cases, to conspiracy to defraud reverse mortgage lenders and the HUD/FHA insurer of the loans.”

“FinCEN has determined, as a result of individual investigations and through its broader analyses, that criminal activity and actors in the residential mortgage market may be connected with a range of other organized criminal activity affecting a range of financial institutions,” Freis said.

See his full remarks.

Written by Elizabeth Ecker

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