I agree with the Attorney General. i am seeing more and more of the subprime folks getting into Reverse Mortgages. I understand that most of the Reverse Mortgages folks at Countrtywide came from their subprime market.

We're possibly talking about two different levels of fraud here, and they depend upon how the fraudsters made their money.

1. Mortgage fraud. In the past, if they made their money in the mortgage business, fraudsters wandered away from reverse mortgages rather quickly because they didn't like the caps on origination fees, and they REALLY didn't like the then-small Service Release Premium compensation on the backside. Throw in the counseling requirement, strict FHA guidelines, and maybe meeting with borrowers 3 times before getting an app, and they quickly saw origination as what they considered unprofitable - making less than 4 points of total front and back-side compensation.

These are the guys who helped us into the sub-prime and ARM mess, but they are also the ones that are the easiest to find, catch, and stop because they're on the states' mortgage radar screen. The states have to get a lot better at follow-through, though. The Housing Bill's new origination caps and new margins and pricing from lenders and investors appear to offset each other as financial incentives, but the new lending limts could encourage more of the other type of fraud.

2. Fraudulent use of loan funds. On the other hand, if they used their own or someone else's reverse mortgage origination as a means of feeding the real money-maker, the disguised but unsuitable and/or fraudulent use of lump sum reverse mortgage loan funds, then it is a different story.

These guys have not been stopped by current mortgage laws and regulation, and they are the guys that the Housing Bill's cross-selling restrictions were aimed at, but miss. They might not be mortgage-licensed at all, they just wanted the funds for annuity sale commissions if they were insurance-licensed, or a fraudulent investment if they had no licenses at all. The cross-selling restrictions will stop some questionable practices if the practitioners want to keep their licenses, but it's main effect will be to punish ethical professionals and mortgage brokers with more hoops to jump through, while doing nothing to find or stop a determined con artist.

I am upset right now because the appraisal is way too low. The comparison is the house next door to mine. I have invested more thqn $50,000 for expansions. One that wasn't mentioned in the appraisal is the double car garage, interior paint, and cabinets. Vinyl exterior, vinyl windows and doors, two exists where windows were, and a landscaped yard. The appraiser valued my home the same as the one next door that is up for sale which has not been appraised. I applied for a Reverse Mortgage and the appraisal is $7,000 to $17,000 lower than it should be. If I don't sign the agreement then I pay for the appraisal and the counseling.

I feel like I just got trapped one more time for trying to do the right thing. I am almost 70 yrs old and I feel like my property was devalued because I had no control over the decisions.

I am in Utah and doing business with EverBank which I am not feeling good about right now especially when they avoid communicating with me only to say Congratulations, please sign and return.

I need help.

Hi Loretta,

Are you located in Washington County? That's the only area of Utah where we have an official "declining market". I'm based out of the Salt Lake valley; you could reach me at 'reverse@utahfinancial.com' and I'll see if we can pull off some kind of rescue.

The first thing I'd want to do would be to contact another appraiser and ask them to do a 'comp search'. This wouldn't reflect the market value of your home, but it would tell us a range of what other properties yours could be compared to, and what those sales prices were. If the results are positive and there's an argument to make for some more value there, the additional loan proceeds could be worth the price of a second appraisal.

It is also possible that the current appraisal is correct - appraisals don't tell you what your home is worth, you only discover that when you sell it. Appraisals only make an argument for a value using the prices that other homes most like it have sold for in the past 6 months to say that "Right now, this home should sell for whatever amount". If the overall market is down, then the examples the appraiser is forced to use may not support what we think the true value is.

Either way, there are no costs incurred to investigate.

My husband and I have a similar problem with a reverse mortgage lender in Oklahoma. The appraiser they sent us admitted he did not have time to research our home value properly and estimated the value at $200,000 LESS than the value! The lender put in the lower value into our file which is now in the FHA system for reverse mortgages. As a result, we did not qualify for the reverse mortgage. The lender told us we cannot redo the application for 6 months. We have been royally messed up by the incompetance of the appraiser and the lending institution. How can we get them to fix this? and Who do file a complaint with?

Thank you.

I agree with JOY about appraisers. I have a friend who did a reverse mortgage. His appraiser let him know the exact appraisal amount before submitting the report to the lender so he wasn't surprised as was I.

I went with another lender but I too have to wait six months for another appraisal or accept the one on file. I am still upset with the less than moral and ethical appraisal not to mention he got $450.00. I know I am not going to stop until I file a complaint so let's hope someone has the information.

Hi Joy,

I've dealt with similar situations. You have 3 Options that I can see:

1. Go back to the same appraiser and get him to re-do the appraisal with more accurate comparaisons to other comparable property's sales. This may be an awkward discussion, but it is the fastest,cleanest solution. The appraisers incentive to cooperate might be to avoid a written complaint to whatever licensing entity regulates appraisers in Oklahoma.

2. Wait out the 6 months and use another appraiser. Besides the wait, this unfortunately means paying two times for one good appraisal. The FHA Case number assigned to your reverse mortgage is tied to the property address, not to an application with any particular lender.

3. Try calling FHA to get them to cancel the existing case number. This is something of a long shot; they don't like to do this for a case number less than 6 months old. The FHA Home Ownership Center for Oklahoma is located in Denver at 303-672-5440.

Try to keep your desire to complete the reverse mortgage separate from the feelings of anger and frustration you must be feeling. The steps you would take in dealing with the two are different, and you can always file a written complaint about the appraiser afterwards.

If you have any specific questions, the site administrator can put you in touch with me.

Good Luck.