Senior Citizens Increasingly Scammed in Reverse
Mortgage Deals, Even by Neighbors
FBI offers advice to senior citizens on avoiding
mortgage scams; latest charges against next door neighbor - see tips
from FBI in box
April 16, 2010 – The reverse mortgage program,
designed by HUD to allow senior citizens to get cash for their home
equity and then live payment free in their homes, has been popular with
cash-strapped seniors. But, history teaches us that where senior
citizens and cash are involved, scammers are not far behind. Two major
fraud cases in recent weeks may be a signal that senior should be on
guard.
Most of the focus and warnings have been to make
seniors safer from what the FBI calls, “unscrupulous professionals in a
multitude of real estate, financial services, and related entities.”
But, the scammer may be just someone like a next door neighbor.
| |
Related Stories |
|
| |
Scam Artists Using Health Insurance Reform Passage
to Sell Fake Insurance Policies
HHS Secretary Kathleen Sebelius sounds alarm, sends
letters to state officials
April 7, 2010
Grandparents Victims of Latest Phone Scam: Pose As
Grandchildren Needing Money
 They ask grandparents to write a check or wire
money to get them out of a bind - read tips to avoid this scam
By Robert Siciliano, Security Consultant to
Intelius
April 6, 2010
CDC Alerts Americans of Fake Email Asking Them to
Enroll in H1N1 Vaccination Program
 Scam drops code in your computer; claims to be registering for a non-existent
state program
Dec. 7, 2009
Reverse Mortgage: Guest Opinion
Reverse Mortgage Insider Has Some Advice for Senior Citizens on Using
These Loans
 ‘A reverse mortgage is complex transaction and not an
inexpensive loan, but when used correctly, it can greatly enhance the lives of
senior borrowers’
by Michael
Branson, All Reverse Mortgage Company
July 31, 2009
Senior Citizens Offered Free Counseling on Reverse
Mortgage by Council on Aging
 Seniors age 62+ can schedule a free reverse mortgage
counseling session through September 30, 2009 – free brochure online now
July 31, 2009
Read more
Senior Citizen Alerts
Also more
Reverse Mortgage News |
|
“Jackson County prosecutors and federal officials
said Thursday that they have filed criminal charges in a fraud scheme
involving the government-sponsored reverse mortgage program - only the
second such case filed nationally,” according to a report in the
Kansas City Star by Tony Rizzo
“But they warned that criminals are looking for
ways to cash in as the reverse mortgage program gains popularity.
Michael Powell of the U.S. Department of Housing
and Urban Development's inspector general’s office, told Rizzo, "It's
more of an emerging trend. We're starting to see it as a bigger
problem."
KCTV 5 News in Kansas City reports this case involved a woman whose
mother died a few years back and left her home to her daughter. “But
instead of selling it, prosecutors said she gave the house to her
elderly neighbor and then took out a reverse mortgage in his name
without his knowledge.”
She grew up in the house next door to him so she
was someone he trusted, according to Perry Cecil, the victim’s son.
His 89-year-old father, David, suffers from
Alzheimer's disease, the son said..
David Cecil became close friends with his neighbor
of many years, Marilyn James. Prosecutors said two years ago, James got
him to put his name on the deed to her mother's house. She then took out
a reverse mortgage in his name for more than $64,000, says the KCTV 5
report.
Tosha Brown, daughter of the woman changed in the
case, said her mother didn't take advantage of Cecil but tried to help
him. She said five years ago, Cecil hired contractors to renovate his
house and went into debt trying to pay the bills.
She said her mother also did some work and never
got paid for it. If James did take out a reverse mortgage, Brown said it
wouldn't have been to hurt him but to help him pay off his debts.
Two Members of Reverse Mortgage Fraud Ring Plead
Guilty
Just last month Kelsey Torrey Hull, 38, and
Jonathan Alfred Kimpson, 27, both of Lithonia, Georgia, pleaded guilty
in federal district court to a conspiracy to defraud reverse mortgage
lenders and the Federal Housing Administration (FHA) insurer of the
loans. Hull pleaded guilty to an additional bank fraud charge involving
mortgage fraud, and Kimpson pleaded to an additional identity theft
charge.
 |
|
U.S. Atty Sally
Quillian Yates |
U.S.
Attorney Sally Quillian Yates said, “These defendants plead to profiting
from the corruption of a FHA-insured program designed to assist seniors
with either cash for equity in their home or with funds toward the
purchase of a home.
“These defendants changed real estate records and
used other fake documents to place seniors in houses worth only a
fraction of the amounts represented, and divert loan proceeds to
themselves. With these prosecutions, we have taken a significant step to
stop this type of crime.”
Inspector General Kenneth Donahue, U.S. Department
of Housing and Urban Development (HUD) said, “HUD’s Home Equity
Conversion Mortgage Program was created to help senior citizens find
greater financial security through FHA-insured reverse mortgage loans.
The HUD Office of Inspector General will aggressively investigate those
who would prey on America’s senior citizens through reverse mortgage
fraud, and encourages anyone having knowledge of such schemes to contact
our HUD Hotline at 1-800-347-3735.”
Reverse mortgages were designed to assist with the
financial security of seniors, ages 62 or older. There are two types of
reverse mortgages.
In a “refi-reverse,” the senior homeowner
receives money from the lender for a portion of the equity in the home
they own.
In a “purchase money reverse,” the senior receives
money from the lender toward the purchase of a new home.
Under both types of reverse mortgages, the senior
does not have to repay the lender for as long as the senior lives in the
home. However, refi-reverse mortgages fund only a percentage of the
property value, requiring significant equity to remain in the property,
and purchase money reverse mortgages require a significant down payment
from the senior borrowers to establish equity in the property.
The equity must remain in the home to cover loan
principal, interest, insurance, and servicing costs upon FHA sale of the
property when no longer occupied by the senior.
|
Warning for Seniors on Reverse Mortgage Scams
The FBI and the U.S. Department of Housing and
Urban Development Office of Inspector General (HUD-OIG) urge consumers,
especially senior citizens, to be vigilant when seeking reverse mortgage
products. Reverse mortgages, also known as Home Equity Conversion
Mortgages (HECM), have increased more than 1,300 percent between 1999
and 2008, creating significant opportunities for fraud perpetrators.
Reverse mortgage scams are engineered by
unscrupulous professionals in a multitude of real estate, financial
services, and related entities to steal the equity from the property of
unsuspecting senior citizens aged 62 or older or to use these seniors to
unwittingly aid the fraudsters in stealing equity from a flipped
property.
In many of the reported scams, victim seniors are
offered free homes, investment opportunities, and foreclosure or
refinance assistance; they are also used as straw buyers in property
flipping scams.
Seniors are frequently targeted for this fraud
through local churches, investment seminars, and television, radio,
billboard, and mailer advertisements.
A legitimate HECM loan product is insured by the
Federal Housing Authority (FHA). It enables eligible homeowners to
access the equity in their homes by providing funds without incurring a
monthly payment. Eligible borrowers must be 62 years or older who occupy
their property as their primary residence and who own their property or
have a small mortgage balance. See the
FBI/HUD Intelligence Bulletin for specific details on HECMs as well
as other foreclosure rescue and investment schemes.
Seniors should consider the following:
● Do not respond to unsolicited advertisements.
● Be suspicious of anyone claiming that you can own a home with no
down payment.
● Do not sign anything that you do not fully understand.
● Do not accept payment from individuals for a home you did not
purchase.
● Seek out your own reverse mortgage counselor.
If you are a victim of this type of fraud and want
to file a complaint, please submit information through our
electronic tip line or through
your local FBI office. You may also file a complaint with HUD-OIG at
www.hud.gov/complaints/fraud_waste.cfm or by calling HUD’s Hotline
at 1-800-347-3735.
>> More information on fraud targeting senior
citizens at the FBI website –
click here
|
Hull and Kimpson took advantage of the system by
faking the required seniors’ down payments needed to qualify for the
FHA-insured purchase money reverses, according to investigators.
The defendants did this through bogus “gift”
letters from “relatives” in amounts between $50,000 and $105,000. They
also used fake “HUD-1” Settlement Statements purporting to document the
sale of the senior’s non-existent assets.
All down payments were actually supplied by the
defendants, not the senior citizens, to be returned to the defendants
upon the reverse loan closings, along with profits substantially in
excess of the true sales prices of the properties.
The return of funds to the defendants were
disguised as either seller proceeds or lien payoffs. All such
fraudulently obtained reverse mortgages included inflated appraisals.
Kimpson’s plea to aggravated identity theft relates
to his use of the stolen identity of realtors and their password to
falsify Georgia Multiple Listing Service (MLS) records to create fake
property listings and sales at inflated amounts in support many of the
fraudulent appraisals.
Hull also committed refi-reverse fraud by
transferring properties into seniors’ names to obtain refi-reverse
mortgages at fraudulently inflated amounts. He thereby avoided the down
payment requirement for purchase money reverses, and was able to divert
loan proceeds to his shell companies, disguised as lien payoffs.
Hull was charged by a criminal information on Feb.
25, 2010. Hull could receive a maximum sentence of up to 30 years in
prison and a fine of up to $1,000,000 on each of the conspiracy and bank
fraud counts.
Kimpson was indicted on Feb. 24, 2010. Kimpson
could receive a maximum sentence of up to 30 years in prison and a fine
of up to $1,000,000 on the conspiracy count, as well as a mandatory
consecutive sentence of two years in prison and a fine of up to $250,000
on the aggravated identity theft charge.
Sentencings for both Hull and Kimpson are scheduled
for July 16, 2010, beginning at 2 p.m., before U.S. District Judge Julie
E. Carnes.
>>
Kansas City Star Report on Reverse Mortgage Fraud
>>
KCTV 5 News, Kansas City Reverse Mortgage Fraud
>>
Watch Video News Report by KCTV
