The [tag]U.S. Department of Housing and Urban Development[/tag] ([tag]HUD[/tag]) – overseer of the popular HECM reverse mortgage program – recently released a new [tag]Mortgagee Letter[/tag] aimed at clarifying Home Equity Conversion Mortgage (HECM) counseling requirements.

In the letter (2006-25), HUD references some recently publicized cases of reverse [tag]mortgage fraud[/tag] and makes it clear it expects HECM counselors to take an active role in educating consumers about how to avoid [tag]reverse mortgage fraud[/tag] schemes.

Preventing Mortgage Fraud Against HECM Borrowers

It has come to HUDs attention that HECM borrowers are increasingly becoming targets of mortgage fraud scams. HUD has learned of a recent fraud scheme involving loan officers originating HECMs and arranging to keep the HECM borrowers loan proceeds. In one case the loan officer arranges for the title company to pay the loan proceeds through two checks. One check is sent to the senior and the other is kept by the loan officer. In another case loan officers are convincing seniors that a standard procedure in the HECM origination process is to sign over the loan proceeds to the loan officer for future disbursement to the HECM borrower. In these cases the loan officer may make a few payments but then keeps the balance of the funds. In an effort to warn HECM borrowers of these potential fraud schemes, HUD advises HECM counselors to discuss the potential of mortgage fraud with their clients. Counselors are to explain the standard ways in which HECM borrowers can access their loan proceeds. Counselors should warn clients against signing over their funds to loan officers or other parties involved in the mortgage transaction. While this type of fraud does not happen in the majority of HECM transactions, HUD believes it is important to educate prospective HECM borrowers about how to avoid becoming victims of fraud schemes (emphasis added).

We’ve previously written about some of the reverse mortgage fraud cases HUD references in Mortgagee Letter 2006-25 and recommend that borrowers educate themselves about these cases and the techniques being used by reverse mortgage scam artists.

Social tagging: HUD Reverse Mortgage > Reverse Mortgage Counseling > Reverse Mortgage Scams

A Few More Related Articles of Interest:

Reverse Annuity Mortgage – Clarifying the Term

California Reverse Mortgage Fraud Bill Signed Into Law

Michigan Reverse Mortgage Scam

Leave them in a hole?

Michigan Reverse Mortgage Scam – A Lesson in Why Counseling is Important