Sunday, Dec. 20, 2009 | 2 a.m.
In Today's Sun
Concerned that older Nevadans may increasingly be targets of fraud from the heavily advertised reverse mortgage industry, Rep. Dina Titus succeeded in getting legislation passed recently to better regulate the industry’s practices.
Titus tucked an amendment into a massive Wall Street overhaul bill approved by the House that would put the reverse mortgage industry under the regulation of the bill’s newly created Consumer Financial Protection Agency. The agency has a broad mandate as part of overall financial services reforms.
“Too often lenders prey on senior citizens with reverse mortgage agreements that promise free money or gifts in order to rope them into confusing agreements,” Titus said in a statement after the bill’s passage this month.
“These unfair agreements threaten the financial security of our seniors and are the latest tool in predatory lending practices,” she said. “Reverse mortgages need to be closely monitored and regulated in an effort to ensure seniors do not lose their homes and the equity they have built up through a lifetime of hard work.”
Reverse mortgages appear to be on the rise, creating a potential new avenue for mortgage fraud related to the housing crisis. The Wall Street Journal reported last summer that the Housing and Urban Development Department’s inspector general uncovered 29 cases of potential fraud this year, up from just two the year before.
The FBI’s mortgage fraud team is also seeing an increase, and the Journal reported the two agencies issued a joint report saying reverse mortgage fraud is occurring across the country and has the potential to substantially rise.
Reverse mortgages enable people 62 years and older to convert home equity into monthly or lump-sum payments, with the lender repaid after the homeowner sells or dies.
Seniors are often attracted to the ability to pull cash out of their properties, but intricate fraud schemes can threaten their homes.
“While this financial product can be appropriate for seniors, it is important that the reverse mortgage lending industry is subject to regulation to ensure transparency and appropriate consumer protections,” Titus wrote in a letter with fellow Democratic Rep. Jan Schakowsky of Illinois, who partnered with her on the amendment, as they urged colleagues to pass the legislation.
In addition to placing the industry under the new agency, the legislation would also require lenders to use the same disclosures mandated in mortgage lending.
The broader Wall Street reform bill is before the Senate.