Assessments vary on the extent of fraud in the reverse mortgage business, although there seems to be a consensus that it is small by comparison to the forward world, although a deep recession in the overall economy seems to be fanning the flames of fraud in reverse mortgages.
Carol Norton, first vice-president, reverse mortgage servicing manager, Financial Freedom Senior Funding Corp., Irvine, Calif., reports seeing “a lot of inquiries from POAs [powers of attorney] for money and [we’re] having to verify with [senior] customers that they’re not fraudulent.” About half of the red flags run down by her company, says Norton, do turn out to be fraudulent in nature.
Speaking at a conference on post-retirement planning in New York last week, sponsored by DealFlow Media, Sherry Apanay, senior vice president, Generation Mortgage Co., Atlanta, said: “We’ve been very fortunate not to see a lot of fraud,” although where it does surface is “in seasoning and flipping,” according to Apanay. She also expressed concern about “brokers working loans that weren’t intended to work,” blurring the line between bad business and fraud. Ralph Rosynek, president/CEO, 1st Reverse Financial Services, Westmont, Ill., agreed that the “number one [fraud] issue is seasoning. Short cuts are being taken that create fraud issues there,” he stated.
Nelson Locke, CEO, Value Financial, north Miami, Fla., says “Fraud is starting to emerge on a large scale.” In the last month, Locke’s firm has declined 15 reverse deals “due questionable occupancy [characteristics].” To combat this concern, the company requires interior photos of a property. “We look for food in the cupboard, toothbrushes in the bathroom, washed bedding in the laundry room and more than two pieces of furniture in the living room.” Locke, who has worked in the reverse mortgage industry since 1994, has even been known to request a photo of the senior sitting in an easy chair.
Neil J. Morse has been a communications professional working in the mortgage finance industry for more than a decade, currently specializing in the reverse mortgage sector. He can be reached at nmorse@morsecommunications.com
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