By the Division of Banks
COMMONWEALTH OF MASSACHUSETTS
COMMISSIONER OF BANKS
In the Matter of
Home Savings of America
a Federally Chartered Savings Association
Little Falls, Minnesota
The Commissioner of Banks ("Commissioner") is charged with the administration of Massachusetts General Laws chapter 167E, section 7 and Massachusetts General Laws chapter 167E, section 7A and applicable regulations found at 209 CMR 55.00 et seq., relating to the approval of reverse mortgage loans made in the Commonwealth. To ensure compliance with Massachusetts General Laws chapter 167E, section 7 the Commissioner has reviewed a solicitation received by a Massachusetts consumer from Home Savings of America ("Home Savings") a federally chartered Savings Association, established on September 1, 1934, located at 35 East Broadway, Little Falls, Minnesota, to determine if Home Savings has engaged in the business of, or is about to engage in, acts or practices constituting violations of Massachusetts General Laws chapter 167E. Based upon such investigation, the Massachusetts Division of Banks ("Division") hereby issues the following CEASE DIRECTIVE ("Cease Directive") as a result of the findings alleged herein.
|A. FINDINGS OF FACT|
Failure to Obtain Approval of Reverse Mortgage Program
- Massachusetts General Laws chapter 167E, section 7 states in part; A bank may make or acquire a reverse mortgage loan, pursuant to a program for reverse mortgage loans which has been submitted to and approved by the commissioner…
- Massachusetts General Laws chapter 167E, section 7 ("section 7") is made applicable to all mortgagees making reverse mortgage loans in the Commonwealth by General Laws chapter 183, section 67. Said section 7 requires Massachusetts state-chartered banks and all other mortgagees including federally-chartered banks intending to make reverse mortgage loans to submit for the Division's approval a program, which meets specific criteria set forth in section 7 and 7A.
- Section 7 requires all mortgagees seeking approval to offer reverse mortgages in the Commonwealth to submit an application that demonstrates that the terms of the program are in conformance with Massachusetts Law. Section 7 provides that mortgagees are prohibited from making a reverse mortgage loan, until the mortgagee has received a notice, in writing, that the prospective borrower has completed a reverse mortgage counseling program which has been approved by the Massachusetts Executive Office of Elder Affairs. Additionally, Section 7 requires all mortgagee's to ensure that an applicant for a reverse mortgage loan is not be bound for seven days after their acceptance, in writing, of the mortgagee's written commitment to make the loan.
False or Misleading Representations in Solicitation
Massachusetts General Laws chapter 93A, section 2(a) states: Unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful.
- On or about October 10, 2011, the Division received a copy of a reverse mortgage loan solicitation ("Solicitation") received by a Massachusetts consumer from Home Savings. A copy of the Solicitation is attached as Exhibit 1.
- The Solicitation was mailed from the "Home Equity Conversion Department" of Home Savings and contained a header, entitled "Section 255 of the National Housing Act (12 U.S.C. 1715x-20) is amended," and contained a "Notification of Eligibility." The Solicitation also stated "IDENTIFICATION PAPERS ISSUED TO RECEIVED AS FILED". The body of the Solicitation notified the Massachusetts consumer that their mortgage now "qualified them for a Home Equity Conversion Mortgage." The Solicitation further stated that "the United States Federal Government Has created this program for seniors who were facing financial difficulty."
- The Solicitation highlighted the following statement "No Monthly Payments are required," however it failed to notify the consumer that other obligations such as real estate tax payments and homeowners insurance payments that became due periodically would still have to be paid by the consumer.
- The Solicitation notified the Massachusetts consumer that in order to reserve participation on their monthly benefit amount and to find out if they had any other benefits under the program they should call a number identified in the Solicitation.
- The Solicitation stated that Home Savings "lens [sic] in all 50 states."
- According to the Division's records, as of the date of this Cease Directive, Home Savings is not approved to make reverse mortgage loans in the Commonwealth of Massachusetts.
- According to the Division's records, as of the date of this Cease Directive, Home Savings has not submitted an application to make reverse mortgage loans in the Commonwealth of Massachusetts.
B. CEASE DIRECTIVE
- Home Savings, and any and all officers, members, managers, employees, subsidiaries, independent contractors, or agents, operating on behalf of Home Savings, and their successors or assigns, shall immediately cease making any reverse mortgage loans on residential property in the Commonwealth.
- Home Savings shall cease mailing the Solicitation identified as Exhibit 1 and any solicitation to Massachusetts consumers that contains any representations or statements that could be considered false, misleading, or have the tendency or capacity to be misleading including solicitations containing false or misleading language or language that had the tendency to be false or misleading.
- Within five (5) days of the effective date of this Cease Directive, Home Savings shall submit to the Commissioner: A detailed record, prepared as of the date of submission, of all borrower property information obtained from Massachusetts consumers including but not limited to all pending applications for reverse mortgage loans for Massachusetts consumers. The records to be produced shall include the consumers' names, addresses, contact information and the dollar amount of each reverse mortgage loan.
- Home Savings must submit a response within five (5) days of receipt of this Cease Directive. The response must indicate whether Home Savings will seek the required approval to make reverse mortgage loans in the Commonwealth. The response submitted must also include a signed copy of the enclosed affidavit, attesting that Home Savings will immediately cease from engaging in any unauthorized activity including any use of advertising or soliciting information from prospective reverse mortgage borrowers in Massachusetts until such time as an approval to engage in such activities is issued by the Commissioner.
Dated at Boston, Massachusetts, this 4th day of November, 2011.
David J. Cotney
Commissioner of Banks