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Distressed Non-Senior Mortgagors
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what to watch for BE AWARE OF THESE FLAGS RED
Utility bills that are not in the applicant’s name
EXISTING LieNS ON THE PROPERTY THAT ARE NOT IN THE SENIOR’S NAME
A MAILING ADDRESS FOR THE BORROWER THAT IS NOT THE PROPERTY ADDRESS
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legal
( The mailing address is different from the property address. Request an explanation and conduct proper diligence if you notice that monthly
In today’s financial environment, perpetrators are continuously becoming more creative in their schemes. Reverse mortgage professionals should know how to spot and identify these potentially troublesome transactions. By being aware and following these best practices, you can help safeguard the program for the senior citizens who rely on HECMs to provide for them in their old age. x
appraising
Distressed mortgagors who are under the age of 62 will sometimes ask senior parents, other family members or friends to take out a HECM loan for them. One condition for a borrower to obtain a HECM is that they live in the subject property as their primary residence. The distressed mortgagor might add the senior citizen to title in order to meet this requirement. In some cases, distressed mortgagors will even assume the identity of the senior citizen and obtain the
( The property has existing liens taken out by someone other than the senior. If the HECM proceeds are being used to pay off an existing mortgage in the name of someone other than the senior, be sure to verify occupancy. Consider requiring a written explanation from the borrower detailing why they are using loan proceeds to satisfy another’s debt. Although there is nothing per se wrong with paying another person’s obligation, this red flag coupled with other factors, such as a recent quit-claim deed adding the senior to title, may warrant additional investigation.
( Rushed Transactions. Be cautious if a customer requires you to move quickly to close his or her loan without providing you sufficient time to ask appropriate questions and request backup documentation. A rushed transaction may be acceptable if there are no other red flags present. However, always be wary of these situations. Crooks may not want to provide you with an opportunity to analyze the transaction. Use your best judgment to determine whether the transaction requires you to take another look at the file or obtain additional documentation.
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( Utility bills that are not in the applicant’s name. Look for any utility bills and other monthly statements that are not in the borrower’s name or that have amounts too little for a person occupying the home full time as their primary residence. If there is any doubt about occupancy, consider sending an agent to conduct a visit to the property to verify whether the senior citizen is in fact living in the property. You should also examine the appraisal photos to make sure the home looks like it is lived in full time.
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O Pay close attention to the methodology used in the appraisal. Be vigilant for comparable sales that are outdated or in dissimilar neighborhoods. Look for the use of a cost approach for a property that is not new construction. Lenders can and should independently verify the value of the comparable sales used in the appraisal by using thirdparty or online resources, such as the Multiple Listing Service. However, note that today’s thieves are sophisticated enough to infiltrate these types of databases and manipulate the sales information. It is therefore essential to continually train your underwriters and appraisal reviewers on these types of red flags and other pertinent issues to help prevent losses resulting from inflated and fraudulent appraisals.
Be vigilant and request backup documentation and explanations for any of the following red flags:
statements or other paperwork related to the HECM loan do not correspond with the senior’s property address. For example, if there are discrepancies between the credit report and loan application, consider utilizing a third party to perform additional research on the property and applicant. You can also call the applicant directly and ask pertinent follow-up questions for reassurance that the transaction is not fraudulent.
underwriting
HECM without the senior’s knowledge by submitting fraudulent paperwork to apply for and obtain the loan.
originating
caution. It is rare that any individual will be in a position to purchase real estate without financing. Require a plausible written explanation as to the terms and circumstances of the transaction and request follow-up documentation as appropriate.
Rushed Transactions
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