State Division of Banks Takes Action Against Illegal Reverse Mortgage Programs Targeting Seniors
Patrick Administration Continues Efforts to Protect Consumers
Reverse mortgages are loans that enable senior homeowners, typically 62 years and older, to convert the equity in their home into income. Massachusetts law prohibits a lender from making a reverse mortgage without a plan that has been approved that includes mandatory counseling.
"The popularity of reverse mortgage products has risen substantially in recent years. However, these products are extremely complicated and every effort should be made to obtain independent legal and financial advice when considering one," said Commissioner of Banks Steven L. Antonakes. "A reverse mortgage is a loan with high up front fees, and over time the loan will deplete the accumulated equity in a senior's home."
Of the actions taken today, three ( First Call Mortgage Company, Inc., Sun West Mortgage Company, Inc., and Gold Reverse, Inc.) were against licensed mortgage lenders for making reverse mortgage loans to Massachusetts seniors without an approved plan. In the case of First Call Mortgage Company, Inc, the company was also cited for unfair and deceptive practices for altering mortgage loan documents and misrepresenting applicants' incomes. All three companies have been prohibited from accepting any new mortgage applications and have been ordered to place all pending applications with a qualified lender at no cost to the consumer. In addition, the companies were ordered to provide the Division complete copies of files for all reverse mortgage loans.
The Division also issued a cease and desist order against American Advisors Group, a licensed mortgage broker, for engaging in unfair and deceptive advertising practices involving reverse mortgage products. Specifically, American Advisors Group engaged in a direct mail campaign in which reverse mortgage loans were marketed as government benefits. The Division's order forbids American Advisors Group from initiating any new mortgage loan transactions and requires pending applications to be placed with a qualified lender or broker at no cost to the consumer. In addition, the company has been ordered to cease its advertising in Massachusetts and provide the Division with a complete list of all individuals that its direct mail advertisements were sent to.
Last month, the Patrick administration launched a new reverse mortgage web site for seniors ( www.mass.gov/reversemortgage). Massachusetts seniors are encouraged to consult the web site or call the Division of Banks at (617) 956-1500 to address any questions they may have. Seniors should also contact their local elder service provider at 1-800-AGE-INFO to learn about additional programs and services.