Feds Attack ‘Estate Planners’ Hundreds Of Elderly Targeted In Reverse Mortgage Scam
Housing Secretary Andrew A. Cuomo on Monday announced efforts to shut down “estate planners” who have charged hundreds of elderly Americans such as Mickey Kimberlin thousands of dollars for services that were available free from the government.
Kimberlin, 72, facing bills for the care of her partially-paralyzed husband that left her almost unable to afford groceries, was asked to pay $4,105 by a California firm for information about how to get a “reverse mortgage” on her house. That information should have been available for nothing, according to Cuomo.
“I hope you nail them to the cross,” Kimberlin said from her home in Las Vegas on a conference call that was piped into Department of Housing and Urban Development headquarters.
“We’re doing the HUD equivalent,” said Cuomo. He announced a “directive” to the nation’s 8,000 Federal Housing Authority lenders, warning them that if they do “business with one of these scam artists, we will eliminate them not only from reverse mortgages but also from all FHA business.”
Reverse mortgages enable homeowners 62 years old and older to borrow a percentage of the equity in their homes, up to a maximum of $160,950.
Elderly Americans participating in the HUD reverse-mortgage program make no repayments while they live in their homes. Lenders recover their loan plus interest from the sale of the house when the owners die or move.
About 20,000 reverse mortgages have been made around the country through HUD’s program, but only about 125 of the nation’s lenders participate. There are also smaller reverse-mortgage programs run by some large private lenders.
The small number of participating mortgage companies and the lack of available information about the program opened an opportunity for companies to offer “estate planning services” to seniors like Kimberlin.
She assumes that a representative of America’s Trust Inc. of San Juan Capistrano, Calif., called her after checking real estate records and finding that she had paid off the mortgage on her home for the second time. She had been looking for a reverse mortgage because of her failing health and her mounting family medical bills. She had already called every bank in Las Vegas to no avail.
She said America’s Trust demanded 8.5 percent of the loan proceeds to put her in touch with a lender who could help her. She negotiated the amount down to $2,500, which was deducted from the proceeds of the loan.