MLO Mentor is an ongoing series covering compliance best practices for mortgage loan originators (MLOs). This article discusses abuse, theft, and fraud schemes related to Home Equity Conversion Mortgages (HECMs). Enroll in firsttuesday’s 8-Hour NMLS CE to renew your California MLO license and learn more about fraud and abuse prevention in your practice.
Home Equity Conversion Mortgages Exploited to Defraud Senior Citizens
In 2009, the Federal Bureau of Investigation (FBI) and the U.S. Department of Housing and Urban Development Office of Inspector General (HUD-OIG) released a report showing widespread Home Equity Conversion Mortgage (HECM) abuses. The FBI and the HUD-OIG found loan officers, mortgage companies, investors, loan counselors, appraisers, builders, developers and real estate agents were exploiting HECMs to defraud senior citizens.
Investigators found scammers used local churches, investment seminars and television, radio, billboard and mailer advertisements to target seniors. Protect your clients by familiarizing yourself with some common HECM scams.
Equity theft schemes
The number one abuse found by investigators was the equity theft scheme. Scammers in equity theft schemes identified foreclosed, distressed or abandoned properties (or buyers) using information contained within county deed records. They then purchased the properties using straw buyers. The straw buyers would commit occupancy fraud by stating their intentions to use the property…
