Kenneth M. Donohue, inspector general for the Department of Housing and Urban Development, told a U.S. House of Representatives financial services subcommittee that he is working with Sen. Claire McCaskill and the Senate Special Committee on Aging to address fraud in the home equity conversion mortgage program.
Donohue told the Subcommittee on Oversight and Investigations on June 18 that the larger loan limits can be attractive to exploiters of the elderly, whether it is by third parties or by family members, according to a prepared statement.
“Due to the vulnerability of the population this program serves, we are also concerned about evasions of statutory counseling requirements, fraud by counseling entities, misleading sales claims, or incomplete compliance with the dispensing of required counseling information,” Donohue said in the statement.
He said the inspector general’s office has been seeing HECM fraud involving property flipping, straw buying recruitment, annuity cross-selling, unauthorized recipients of HECM payments, and other consumer fraud involving onerous fee payments.
Donohue said he is also addressing these issues with Rep. Barney Frank, chairman of the House Committee on Financial Services.
Donohue added he would be working with the Office of the Comptroller of the Currency on the topic of property tax and insurance escrows for HECMs, as defaults are a concern of both departments.
Meanwhile, McCaskill will meet with constituents next week in her home state of Missouri to examine “growing problems in the quickly expanding reverse mortgage industry,” according to a statement from her office. The hearing is scheduled for June 29, in University City, Mo.
McCaskill has been leading Senate investigations and legislative reform of the reverse mortgage industry. Earlier this year she attempted fraud reform in the Fraud Enforcement and Recovery Act. Last year, McCaskill’s initiatives toward counseling funding and limiting cross-selling were enacted with the Housing and Economic Recovery Act. The Special Committee on Aging held a hearing on reverse mortgages in 2007.
