In recent news from the Mortgage Review Board (MRB) of the U.S. Department of Housing and Urban Development (HUD), a proposal to permanently withdraw the HUD/FHA approval of Financial Mortgage USA, Inc. (FMUSA) was announced.

Based in Hawaii, FMUSA is a Home Equity Conversion Mortgage (HECM) lender.
HUD’s MRB claims the company failed to implement an FHA-required quality control plan. The purpose of this plan is to implement the separation of lending operations from those of its affiliated insurance company and conformation to prudent lending practices while properly providing borrowers with housing counseling services.

The company violated numerous HUD/FHA requirements, according to the HUD. Instead of implementing an independent quality control plan, FMUSA relied solely on its VPO to conduct quality control reviews.

In addition, the firm failed to provide a clear and effective separation between itself and Estate Planners of America, an affiliated life insurance company. Finally, the company was negligent in providing borrowers with a list of HUD-approved housing counseling agencies in Hawaii.

HUD alleges that FMUSA confused elderly borrowers, making them unable to decipher who they were doing business with. The firm failed to discuss the options for receiving HECM proceeds with borrowers and in some cases ignored borrowers’ stated preferences in disbursing the HECM proceeds.

In conjunction with Estate Planners of America, FMUSA conned borrowers into purchasing annuities which weren’t requested, and the two companies never communicated to borrowers that these annuities had indeed been purchased. In one alarming scenario, FMUSA convinced an 88-year-old borrower to purchase an annuity which would not mature until she turned 104.

With 30 days to respond to the board’s proposed withdrawal, FMUSA must seek a hearing before an Administrative Law Judge. The maximum civil money penalty of $97,500 is being imposed by the MRB. After the complaint seeking the money is served, FMUSA will have 15 days to request a hearing on the imposition of these civil money penalties.

David Stevens, FHA commissioner said, “FHA will not tolerate lenders who violate our rules and prey on those who depend on a reverse mortgage to continue to live independently. FHA-approved lenders must understand that we mean business when it comes to protecting the FHA insurance fund from those who cut corners and take advantage of unsuspecting senior citizens.”