[Updated February & May 2019] In December, 2016, the Consumer Financial Protection Bureau (CFPB) took direct aim at the issuers of reverse mortgages. The agency inked consent orders with three of the largest issuers of reverse mortgage products. All three were accused of deceptive advertising practices. The charges are important since many borrowers who sign up for these products are elderly homeowners.
American Advisors Group
The largest issuer of reverse mortgages is American Advisors Group (AAG). Astonishingly, the CFPB claims that AAG distributed marketing materials claiming that borrowers “could not lose their home and that they would have the right to stay in their home for the rest of their lives.” The materials were sent to approximately 1 million potential borrowers.
American Advisors also told customers “that they would have no monthly payments and that with a reverse mortgage they would be able to pay off all debts.”
These statements are obviously false but given the target population of the ads, quite troubling.
Reverse Mortgage Solutions
Houston, Texas based Reverse Mortgage Solutions (RMS) was also the subject of a CFPB consent order. The government accused that company of telling would-be borrowers “that they would have no payments with a reverse mortgage and that they would ‘always retain ownership’ and ‘can’t be forced to leave.’ Once again, all those statements are untrue.
In addition to making false claims about their products, RMS also used high pressure sales tactics and told some potential borrowers that they had to decide that day to apply or lose eligibility.
[May 2019 Update] Ditech, the parent company of Reverse Mortgage Solutions, is in bankruptcy. Earlier this spring, the U.S. Trustee agreed to the formation of a creditor’s committee to represent the interests of consumers who have reverse mortgages.
Ditech has no asked the court to disband the committee. Victims of RMS’ alleged reverse mortgage scams are of course objecting to Ditech’s request. A consumer advocate says, the committee is needed because the borrowers are all elderly and many are also disabled or financially unstable, and therefore vulnerable.
The legal counsel for the newly formed consumer committee told the court,
“As noted in many of the requests to appoint a consumer committee, consumer borrowers include some of the most vulnerable creditors – including reverse mortgage borrowers who are ‘exclusively elderly, generally have low income, lack access to counsel, and have higher rates of communicative, cognitive, and other disabilities that make it difficult for them to advocate for themselves.”
Aegean Financial (Jubilados Financial)
The third lender targeted by the CFPB was Aegean Financial. Based in California, Aegean operates in just five states. It also targets Hispanic borrowers and trades under several names including Jubilados Financial.
Regulators say that Aegean made a wide variety of misrepresentations including “that consumers could not lose their home and that they would have the right to stay in their home for the rest of their lives.” The company also claimed that borrowers “would have no payments with a reverse mortgage and claimed that consumers would not be subject to costs associated with refinancing a reverse mortgage.”
Worse, the company also suggested to its Spanish speaking customers that it was affiliated with the U.S. government. One sales script said, “if you are 62 years old or older and you own a house, we have good news for you; you qualify for a reverse mortgage from the United States Housing Department.”
In announcing the settlements, CFPB Director Richard Cordray said, “These companies tricked consumers into believing they could not lose their homes with a reverse mortgage. All mortgage brokers and lenders need to abide by federal advertising disclosure requirements in promoting their products.”
Other Reverse Mortgage Issuers
RMS, American Advisors and Aegean Financial aren’t the only reverse mortgage issuers. While the big banks have stepped back, there are plenty of other companies still within the space. These companies include:
- One Reverse Mortgage. Affiliated with Quicken Loans, One Reverse is the 5th largest HECM issuer in the United States.
- Liberty Home Equity Solutions. The 4th largest HECM issuer, Liberty was formerly Genworth Financial Home Equity Access, or GFHEA, and was originally known as Liberty Reverse Mortgage.
- Reverse Mortgage Funding LLC. The third largest HECM lender in the U.S.
- Finance of America Reverse LLC. This company was originally known as Urban Financial of America and is the 2nd largest HECM issuer (American Advisors has the number one spot). In addition to traditional government backed reverse mortgages, Finance of America Reverse offers jumbo reverse mortgages for owners of high-value homes, who can take out more than $2 million in equity. These jumbos are not government insured.
False Advertising and Reverse Mortgage Scams
False advertising violates the Mortgage Acts and Practices-Advertising Rule (“Regulation N”) and the Consumer Financial Protection Act.
Mortgage lenders have a legal obligation to be truthful in all statements made to borrowers. Regulation N spells out those obligations including:
- Accurately stating the interest charged for the loan including monthly payments;
- Disclosing the annual percentage rate (APR) and whether interest is simple or compounded;
- Full and accurate disclosure of any fees or costs to the consumer;
- How taxes and insurance will be collected;
- Disclosure of any prepayment penalties;
- If a reverse mortgage, how the product works;
- Disclosure of how the lender may declare a default; and
- The consumer’s ability to obtain a refinancing or modification of any mortgage credit product or term.
(This is just a partial listing of a lender’s responsibilities.)
Reverse Mortgages Guaranteed by the US Government
Most reverse mortgages are guaranteed by the Federal Housing Administration (FHA). Others like Fannie Mae also have similar guaranty programs.
Because these products have federal backing, issuers like AAG, RMS and Aegean must certify their loans are I compliance with all HUD and FHA guidelines.
Unless the housing market really crashes, taxpayers probably won’t have to pay out on these mortgages. That means fewer whistleblower opportunities under the False Claims Act.
Unfortunately, homeowners who use reverse mortgages are still very much at risk. Despite the ads, folks can lose their home and are responsible for taxes.
Class Action Opportunity for Reverse Mortgage Holders
People who lost money in reverse mortgages may find it difficult to find a lawyer to take their case. We recognize that many holders of these products are retired or elderly and have little money to pay lawyers.
We are currently investigating possible class actions against Aegean Financial (Jubilados Financial), American Advisors Group (AAG) and Reverse Mortgage Solutions (RMS). If you were defrauded, lost your home or feel that you are the victim of misleading advertising, give us a call. We are also interested in other lenders who may have lied to borrowers or misrepresented their reverse mortgage products. In a class action case, the lawyers front all legal fees and costs. You don’t pay anything to the law firm unless they first collect money for you.
Class actions against lenders are limited by the Class Actions Fairness Act. This law requires “commonality” in damages. Unless the claim involves an improper fee (such as a recurring fee for drive by appraisals), we can’t bring a class claim.
As much as we would love to shut down these reverse mortgage lenders for their deceptive advertising claims, we are limited by Congress in what cases can be made into class actions.
An example of a recent class action involves Champion Mortgage. The company was accused of using automated software to order “repeated and unnecessary” drive by appraisals each month. These charges were added to the amount of the loan balance thus reducing the homeowners equity.
A current lawsuit accuses CIT Bank and Financial Freedom of charging excessive fees for force place insurance.
Unless your claim involves unreasonable or unnecessary fees, we probably can’t help with a class action. That means you will need to find individual representation.
If you worked at any of these companies, we also want to speak with you. There may be some whistleblower award opportunities and certainly the opportunity to help us make things right.
For more information, contact attorney Brian Mahany at . At this time, we are only investigating possible whistleblower actions brought on behalf of employees, former employees and others with inside information about illegal practices taking place at these companies and class actions involving unreasonable or unnecessary fees.
Under the False Claims Act, whistleblowers with inside information about reverse mortgages may be entitled to large cash rewards. Because most reverse mortgages (HECMs) are federally insured, ripping off homeowners also involves risks to the government.
Unfortunately we are unable to assist individual homeowners. Although we are a whistleblower firm, we also have a companion lender liability practice (suing banks and mortgage companies). Feel free to see some of our successful efforts against banks at our Lender Liability Lawyer site. You can also visit our American Advisors Group reverse mortgage fraud whistleblower post.
If you or a loved one is a homeowner and have problems with a reverse mortgage, contact us online or by email only. We cannot accept homeowner calls. Please remember we do not take all phone calls on these type cases and cannot provide individual representation. All inquiries are protected by the attorney – client privilege and kept confidential.