The HUD’s Mortgagee Review Board has proposed to permanently withdraw HUD/FHA approval for Financial Mortgage USA, Inc., a reverse mortgage lender based in Honolulu, Hawaii.
HUD alleges that the company failed to implement an FHA-required quality control plan, instead allowing its Vice President to conduct such reviews.
Additionally, it failed to separate its lending operations from those of an affiliated life insurance company, so borrowers were unclear who they were actually doing business with.
In one particularly egregious case, the company apparently got an 88-year-old borrower to purchase an annuity that wouldn’t mature until her 104th birthday.
The reverse lender also failed to discuss options for receiving home equity conversion mortgage (HECM) proceeds, or flat out ignored borrowers’ stated preferences with regard to their distribution.
HUD claims Financial Mortgage USA did not conform to prudent lending practices and failed to provide borrowers with a list of housing counseling agencies in their area.
“FHA will not tolerate lenders who violate our rules and prey on those who depend on a reverse mortgage to continue to live independently,” said FHA Commissioner David Stevens, in a statement.
HUD slapped Financial Mortgage USA with a $97,500 civil money penalty and said the company has 30 days to respond to the Board’s proposed withdrawal and seek a hearing before an Administrative Law Judge.