2 Bills Would Aid Seniors in Obtaining Loan Data
Measures have been introduced in Congress to prevent private financial advisors from charging senior citizens for services provided free by the Department of Housing and Urban Development, an issue recently highlighted by a case involving an Orange County businessman.
The legislation is designed to protect senior citizens who participate in HUD’s “reverse mortgage” program. That program allows cash-poor elderly people to draw on the equity in their homes without moving, while delaying repayment of the loans until the houses are sold.
Some investment advisors have been charging seniors up to 10% of their total loan amounts for enlisting them in the program. HUD officials view this practice as unscrupulous, given that the government is prepared to offer such services for free.
HUD has sought to crack down on about 100 companies that it has found to be involved in the practice. But a federal judge in Washington--ruling in a case brought by the Orange County businessman--said that HUD had no authority to act since no law applies to the practice.
The legislation introduced Thursday, sponsored by Sen. Alfonse M. D’Amato (R-N.Y.) in the Senate and Rep. Rick Lazio (R-N.Y.) in the House, would give HUD the legal backing the court said it lacks.
“Legitimate investment counselors don’t engage in this kind of shady activity that skirts around the law,” D’Amato said. “Now we’ll see that there is a law to protect our senior citizens.”
Under the legislation, the lending companies that administer reverse mortgages would be required to disclose fully all costs of obtaining loans, including any charges by financial advisors.
Orange County businessman Jeffrey G. Butler brought the suit that stopped HUD’s crackdown last month.
If some of the costs are determined by federal officials to be unnecessary, the agency would have the authority to prevent the lenders from participating in HUD programs.
HUD Secretary Andrew Cuomo, claiming that several hundred seniors seeking reverse mortgages have been victims of financial advisors, pledged to support the measures. “The department will take as firm a stand on this as it has ever taken,” he said.
Cuomo added: “If a lender does business with one of these scam artists, in my opinion, they have no place working with HUD, and not only would they be disqualified from working with this specific program but they should be disqualified from doing any business whatsoever with the Federal Housing Authority or the Department of Housing and Urban Development.”
Butler’s companies offer financial and estate planning services to senior citizens and help to prepare the legal documents necessary to secure reverse mortgage loans. Butler claims that his companies, America’s Trust, Inc., and Patriot, Inc., both located in San Juan Capistrano, provide legitimate services, such as arranging repairs and termite inspections, that are not duplicated elsewhere.
Sharon Babbin, Butler’s lawyer, criticized the proposed legislation as a bid by federal officials “to do what they could not do” when the federal judge blocked their recent crackdown effort.
About 20,000 reverse mortgages have been approved since the inception of the program in 1989, according to federal officials.
