Senate Subcommittee on Aging & Financial Freedom Mess

I refrained from posting on this subject for a few days because there were so many stories floating around and I wanted to make sure I had a good grasp on what happened. 

It all started when a press release was issued from the Law Offices of Ronald A. Marron, stating that the Senate Subcommittee on Aging will be hearing testimony on unlawful sales practices targeting seniors by Financial Freedom.  The hearings, chaired by Senator Claire McCaskill (D-MO), come on top of lawsuits filed in California, San Diego involving the sale of Reverse Mortgage Products by Financial Freedom Senior Funding Corporation alleging excessive fees and use of proceeds to purchase additional financial products, such as deferred annuities. 

The press release issued takes a clear shot at Financial Freedom:

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the Senate Panel invited Financial Freedom to attend the hearings. To defend its conduct, Financial Freedom’s general counsel and Vice President, Joel Schiffman had agreed to send a corporate representative to testify before what is expected to be an incredulous and possibly hostile Senate Panel. However, yesterday Financial Freedom reversed course and stated that they will NOT be sending a representative after all. Financial Freedom’s Vice President and Senior Counsel Mr. Schiffman who at first told senate staffer’s “thanks for inviting us” and whom had himself agreed to attend; has now informed the Senate that Financial Freedom will not be attending the Senate hearings due to a “scheduling conflict”.  Members of the Reverse Mortgage Association are very concerned over the nature and content of the hearings and have been courting their republican allies to garner some support.

After I read this I was surprised/shocked and didn’t really know what to believe but the thing that struck me as odd was the “Members of the Reverse Mortgage Association are very concerned”... Reverse Mortgage Association?  I’ve never heard of the Reverse Mortgage Association before have you?  I’ve heard of another association that  has a “National” and “Lenders” thrown in somewhere but not Reverse Mortgage Association. 

A few days after the hearing, a representative from FF contacted Salon, which had written “The Next Subprime: Reverse mortgage” regarding the hearing with the following response.

Statement on U.S. Senate Special Committee On Aging Testimony Given By Carol Anthony

By: Joel A. Schiffman Senior Vice President/General Counsel Financial Freedom Senior Funding Corporation (Financial Freedom)

This morning, the U.S. Senate Special Committee on Aging heard testimony concerning reverse mortgages and the use of the proceeds of reverse mortgages for the sale of annuities. Applicable privacy laws preclude us from providing a detailed response to the specific allegations asserted against Financial Freedom by Carol Anthony at the hearing, but we feel compelled to provide some important background.

First, contrary to the allegation made during the hearing, Financial Freedom did not make the loan that was the subject of Ms. Anthony’s testimony. Second, Financial Freedom fervently denies the allegations that have been made and we are comfortable that Financial Freedom acted properly at all times.

For the record, Financial Freedom simply purchased the loan after it had been closed by the original lender, Senior Freedom Corporation Funding and referred to in Ms. Anthony’s testimony as Senior Financial Freedom (which in no way is affiliated with Financial Freedom). Regretfully, the similarity between names has caused unwarranted focus on Financial Freedom. Moreover, it is the policy of Financial Freedom to require each purchased loan file to contain certification that the borrower received counseling from a HUD-approved counseling agency before the original loan was closed.

Financial Freedom representatives have volunteered to go the Washington after the first of the year to meet in person with the senators on the committee and theirs staffs, and this idea has been favorably received. We look forward to working with the committee on these important issues.

So, it looks like FF acquired the loan through their wholesale channel and had no part to do with any of the allegations given by Carol Anthony.  Whether the attorney made an honest mistake in regards to confusing the two different companies is yet to be seen, but he certainly did a good job generating a large amount of negative press for FF and the reverse mortgage industry.  I’m surprised FF didn’t send anything out to their brokers regarding all of this… I know a handful of RMD readers emailed me asking about it… more to come on the rest of the hearing.

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