LEGISLATION TO STOP REVERSE MORTGAGE RIP-OFFS
WASHINGTON -- Housing Secretary Andrew Cuomo today joined bipartisan members of the House and Senate to propose legislation to stop a reverse mortgage scam that robs elderly homeowners of thousands of dollars.
THAT BILK SENIOR CITIZENS OF THOUSANDS OF DOLLARS
PROPOSED BY HUD AND HOUSE AND SENATE MEMBERS
Cuomo and the lawmakers jointly proposed the Elderly Homeowners Loan Protection Act to put an end to unscrupulous practices by companies that prey on senior citizens receiving reverse mortgages.
"We will not tolerate white-collar muggings of our parents and grandparents," Cuomo said. "We will not allow elderly homeowners who've made mortgage payments for decades to be robbed of thousands of dollars in an instant by smooth-talking con artists."
Members of the House and Senate introducing the legislation are Senator Alfonse D'Amato,(NY), chairman, Senate Banking, Housing, and Urban Affairs Committee and Representative Rick Lazio,(NY), chairman, House Banking Subcommittee on Housing and Community Opportunity. Co-sponsoring the legislation are Senator Richard Byran, NV; and Representatives Jim Leach, IA, chairman, House Banking and Financial Services Committee; Joe Kennedy, MA, ranking member, House Banking Subcommittee on Housing and Community Opportunity; and Patrick Kennedy, RI.
Senator D�Amato said: �Excessive reverse mortgage servicing fees are gouging low-income seniors, who are usually on fixed incomes. That is just plain wrong. Our legislation outlaws this despicably practice and protects our seniors from being preyed upon by sharp operators.�
Representative Lazio said: �With the support of Secretary Cuomo, the legislation I have introduced today will help rid these unconscionable practices and maintain a valuable instrument of security for our nation�s senior homeowners.�
Reverse mortgages allow homeowners 62 and older to borrow thousands dollars against the value of their homes, with repayment delayed until the borrower dies or moves out of the home. The Department of Housing and Urban Development has insured about 20,000 such reverse mortgages, and expects to insure many more in the future. The loans are made by private lenders.
Many older Americans signing contracts with the scam artists are unaware that the firms charge a fee of up to 10 percent of the total amount borrowed through a reverse mortgage, Cuomo said. This works out to a fee of $5,000 on a $50,000 reverse mortgage, or $10,000 on a $100,000 reverse mortgage -- for information available free from HUD on a toll-free phone line -- 1-888-466- 3487.
So far, several hundred elderly homeowners have been victimized by the scam, but the number could grow dramatically if no action is taken, because the companies charging the large fees are aggressively selling franchised distributorships, Cuomo said.
HUD's March 17th announcement of the directive sharply curtailed the scam, alerting not only lenders but the American people as the result of extensive coverage of the action in the news media. HUD has received thousands of calls on its toll-free line since the announcement.
During the March 17th press conference, three elderly women revealed how they had been scammed of as much as $5,700 from the companies.
Maxine Wittig of Norwalk, CA, said then: �I wouldn�t want my worst enemy to be taken the way I was.� Mickey Kimberlin of Las Vegas echoed her concerns: �I hope you nail them to the cross.�
Both women said today they were pleased to hear of the HUD legislation.
The proposed legislation is designed to make permanent HUD's action to bar lender dealings with the companies charging the exorbitant fees, avoiding any delay caused by drawn-out litigation on technical legal issues.
"We must act as quickly as possible, to prevent any more senior citizens from being victimized," Cuomo said. "For an older American living on fixed income, struggling to meet daily expenses, the loss of thousands of dollars is a terrible financial blow. We are determined to stop it and stop it now."
The American Association of Retired Persons endorsed HUD's earlier directive to lenders to stop dealing with the companies charging senior citizens thousands of dollars for reverse mortgage information.
The HUD reverse mortgage program is formally known as the Home Equity Conversion Mortgage (HECM) program and is referred to by that name by the firms charging large fees.
Content Archived: January 20, 2009