Fraud is up in regard to Reverse Mortgages
The Federal Bureau of Investigation and the Office of Inspector General of the Department of Housing and Urban Development (HUD) are sounding warnings about yet another scam in the mortgage industry. HUD which manages federally insured mortgage loans states that the Reverse-Mortgage Market is seeing an increase in mortgage fraud. Representatives from both the FBI and HUD down play the increase but still issued a warning to seniors about the fraud that is occurring. HUD currently manages approximately ninety nine percent of the Reverse-Mortgage Market.
Reverse-Mortgages are available to seniors over the age of sixty two and older. The mortgage allows for the homeowner to use the equity in their home as cash. The mortgage is converted and the lender sends a check to the homeowner. The homeowner can choose to receive a monthly check, a line of credit or a lump sum. The mortgage is then repaid with interest if the homeowner sells the home, defaults on property taxes, defaults on homeowners insurance or dies.
The most recent data available from HUD in regard to fraud involving Reverse-Mortgage Loans shows that they have received twenty nine cases this year.HUD received two cases of fraud last year on Reverse-Mortgage Loans. HUD’s fiscal year end on September 30th and new data will be made available at some point after that date.
Reverse-Mortgage Fraud is usually an act of fraud that is carried out by family members of the victim but an increase in non-related Reverse-Mortgage fraud is occurring. Non-related Reverse-Mortgage fraud is cropping up by unscrupulous caretakers and financial representatives who prey on seniors. Several cases are from real estate investors that purchase properties at below value and sell them for profit to seniors using Reverse-Mortgage programs and inflated appraisals.
Lawrence Ford of Orlando, Florida became a victim of Reverse-Mortgage fraud when he moved in 2008. Ford used Garry Martin, 37, who was convicted of mortgage fraud in New York; as his title agent when he closed on his property. Martin coordinated approximately ten Reverse-Mortgage scams and pocket somewhere around one million from his victims. Martin acted as the title agent in all cases. His duty was to distribute the funds from the Reverse-Mortgage Transaction and payoff the homeowners’ conventional loan. Martin instead kept the funds and never paid the conventional loans. Martin in an effort to conceal his plan had the mortgage statements of his victims sent to an address that was controlled by him; effectively keeping the homeowners from finding out. The victims didn’t know they had been scammed until they received phone calls from the lenders in regard to their delinquent payments. Martin is currently in federal prison for mortgage fraud and faces up to a twenty year sentence. Ford is left with few options unless the lender agrees to modify his loan. He is fearful that Bank of America Home Loans will foreclose on his seven acre ranch. Ford now sixty eight years old has nowhere to put his cars, horses and tools. A representative from Bank of America Home Loans stated that there is no immediate danger of foreclosure and they are working with Mr. Ford to find a modification plan to resolve the issue.
The scam against Mr. Ford was perpetrated by a non-related individual however most are carried out by relatives as is the case with an eighty four year old woman in St. Paul, Minnesota. Larry Bekis, 51, took out a Reverse-Mortgage on his mothers Lauderdale, Minnesota home while she was in a nursing home. Bekis received over one hundred twenty one thousand dollars and failed to pay the nursing home over forty nine thousand dollars to the nursing home for his mothers care. Bekis plead guilty to theft by swindle and received a sentence of thirty days in jail and five years of probation. His attorneys are contesting the judge’s order that Bekis pay over eighty thousand dollars in restitution.
One fraudster from Brooklyn, New York, Thomas Prusik Parkin took Bakis scheme several steps further and took out a Reverse-Mortgage on his dead mother’s home. Parkin was able to perpetrate his scam as he provided the funeral director with a fraudulent social security number and date of birth. Parkin also kept the illusion that Mrs. Parkin was still living by dressing up in her clothing, cane and oxygen mask. He would venture out disguised as to make everyone believe Mrs. Parkin was alive and well. Dennis Ring, Deputy Bureau Chief in the rackets division of Kings County District Attorney’s Office stated that because there was no legitimate death certificate of Mrs. Parkin’s death on file, Parkin was able to perpetrate his crime. Parkin was able to obtain some four hundred thousand dollars under the line of credit. He used it to pay tax liens on the home that he still maintains he owns despite the home being foreclosed on in 2003. Investigators in the case also accuse Parkin of stealing fifty two thousand dollars in government benefits that Mrs. Parkin qualified for.
Lenders such as Wells Fargo Home Mortgage, MetLife Bank and Financial Freedom Acquisition LLC are taking measures to distinguish and avert the growing fraud problem. They are requiring that the borrower of a Reverse-Mortgage Loan have owned the home for over six months to a year. The requirement will help to eliminate flipping.
Flipping is a scam were so called investors purchase properties in foreclosure, do cosmetic fixes to the property, inflate the appraisal and then sell them at above market pricing. The investors like to sell them to aging borrowers using the Reverse-Mortgage and promises of no money down. The proceeds are usually distributed out to the scam organizers. Officials say that it isn’t uncommon for “so called investors” to recruit seniors from homeless shelters to perpetrate the scam.
United States Senator Claire McCaskill (D-MO) has submitted legislation that would require government certified professionals to conduct appraisal on these types of loans. The issues with Reverse-Mortgage Loans became more of a concern due to the increase of the maximum loan amount from $417,000 to $625,000. The increase made obtaining Reverse-Mortgages even more lucrative for perpetrators of this crime.
While HUD is down playing the potential fraud on Reverse-Mortgage loans the increase from two cases last year to over twenty nine currently leaves investigators on the alert for the potential yet to come.
