Bills Seek to Aid Elderly on Housing Advice

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.