February 23, 2020

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Prison Time For Reverse Mortgage Scammers

From time to time, we report news of housing scams that can affect FHA borrowers. It’s a way of raising the awareness that such scams exist, a reminder of the necessity of being careful in the loan process.

The latest news from the FHA and HUD includes a report of three loan officers and a title agent who have been barred from doing business with the FHA/HUD following their convictions on fraud charges.

The action was announced in a press release at HUD.gov, HUDNo.12-069:

“The U.S. Department of Housing and Urban Development (HUD) today announced the indefinite debarment of three South Florida mortgage loan officers and a Pittsburgh title agent following their criminal convictions on charges they defrauded elderly borrowers, mortgage lenders and the Federal Housing Administration (FHA). Marcos Echevarria, Louis Gendason, John Incandela and Kimberly Mackey pled guilty to charges of conspiracy to commit wire fraud for their part in a $2.5 million nation-wide reverse mortgage scam. All four individuals are currently serving prison terms.”

What does “debarment” mean? According to the press release, the action “effectively bans these individuals from conducting business with the federal government in the future.” HUD Secretary Shaun Donovan is quoted in the release, stating, “HUD will not tolerate those who abuse the mortgage system and target elderly borrowers for their personal gain,” said HUD Secretary Shaun Donovan. “Reverse mortgages can help senior citizens on fixed incomes plan for the future, but it is shameful to bilk the elderly out of their life savings.”

The press release also describes the scam operation–details borrowers considering an FHA Home Equity Conversion Loan should pay close attention to–according to the press release, “the three used their positions to identify financially vulnerable elderly borrowers and pressured them to refinance their existing mortgages into an FHA-insured reverse mortgage or Home Equity Conversion Mortgage (HECM).”

Other details in the scam include falsified HUD-1 settlement statements filled out to indicate paid off mortgages when no such payoff ever took place. There were also fraudulent appraisal reports, and falsified short sales, “defrauding the lenders holding the borrowers’ first mortgages” according to HUD.

This scam took place in seven different states and ran for over a year. According to the Department of Housing and Urban Development, the case was investigated by HUD, the Internal Revenue Service, the United States Post Office, and the FBI.

When it comes to reverse mortgages, also known as Home Equity Conversion Mortgages or HECM loans, borrowers should beware of high-pressure sales tactics. It should also be known that FHA HECM loans require the borrower to go through mandatory HECM loan counseling so as to properly understand the nature of these loans and the financial responsibilities that can accompany them if the terms of the loan aren’t met.

Contact the FHA directly to learn more about HECM loans or how to complain about fraud, discrimination or violations of the Fair Housing Act.

Joe Wallace - Staff Writer

By Joe Wallace

April 18, 2012

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.

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