HECM Fraud Investigations

Assistant Special Agent in Charge, Office of the Inspector General (OIG), U.S. Department of Housing and Urban Development (HUD), Michael Stolworthy.

Stolworthy began the session by making it clear that he is a “big supporter of reverse mortgages” and thinks the HECM product is a great product for seniors. Unlike some past speakers from HUD, Stolworthy stayed for the entire conference, and lauded the conference and the industry for being so receptive and teaching him so much.

He noted that he had several dozen investigations targeting HECMs specifically, out of the 1250-1500 open mortgage fraud investigations.  He used these examples as proof that mortgage fraud within the HECM industry is real.

The HECM cases primarily involved cross selling, theft by loan officers, straw buyer schemes, and HECM for Purchase schemes. While Stolworthy noted that the fraud is not prevalent or widespread, it does involve several hundred loans.

Stolworthy also told the industry of the Homes for Seniors Program, a program involving gangs, such as the Crips, using HECMs to launder money and carry out organized criminal activity.  These fraud cases put seniors in homes and then take the proceeds of the reverse mortgage for the gang.

Stolworthy reiterated that they are looking for HECMs with cash out options and property flips as proof of fraud. However, it was refreshing to hear Stolworthy’s faith in the program and helpful for the industry as a whole to realize all the ways in which the product can be misused.

ASAC Michael H. Stolworthy
HUD-OIG
451 7th Street SW, Room 8266
Washington, DC 20410
mstolworthy@hudoig.gov

Source: NRMLA Conference

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