HECM Servicers Face Potential Fraud Risk
LAS VEGAS-Home-equity conversion mortgages, those backwards loans seniors use to turn their homes into cash, are more susceptible to fraud than other types of loans, according to a specialist in reverse mortgage servicing.
These seniors-only loans, reserved for owners 62 years of age or older, are "more vulnerable than standard products because you're dealing with seniors," Linda Bridges of Wells Fargo Home Mortgage said at SourceMedia's Third Annual Mortgage Fraud Conference here. Reverse mortgages are so prone to fraud, she said, that anyone in the business of dispersing funds to borrowers should consider putting a fraud specialist on staff to monitor the loans.
One of the big concerns regarding a reverse mortgage is elder abuse, especially by family members who are trying to get at grandma and grandpa's fortune, Ms. Bridges told the conference. Another issue is the flexibility by which borrowers can receive their money. Borrowers can switch at will between lines of credit and cash payments, either scheduled or in lump sum. And to make matters worse, escrowing for taxes and insurance is totally optional.
To prevent fraud, Ms. Bridges, who has spent 23 years in mortgage servicing, the last seven in the reserve sector, said servicers need to monitor authentication, direct dedosits, multiple withdrawals, forgeries, address changes, customer phone contact, and death records.