Phoenix Business Journal is reporting that Arizona Attorney General Terry Goddard is concerned that some of the less reputable mortgage brokers who were part of the adjustable-rate and subprime loan mess are migrating to the reverse mortgage business. "Because of their complexity, I believe reverse mortgages are the next area where fraud artists can get the advantage on people," he said. "I think it is already starting to happen."
Goddard said the Attorney General’s Office is currently looking into several reverse mortgage operations and will prosecute if fraud is uncovered, though he acknowledged that fraud cases often are difficult to prosecute when consumers sign off on mortgage documents and disclosures.
According to the States Attorney’s office, mortgages ranked as Arizona’s eighth-most common consumer complaint for the first seven months of 2008, up from the 15th-most common in 2007. How many of the complaints are related to reverse mortgages specifically is unknown.
Curt Novy, a mortgage fraud expert who does work in Arizona and California, expects to see more reverse mortgage problems in markets such as Phoenix. Novy, founder of MortgageFraudExpert.com, said seniors often are targeted by fraudulent businesses.
While I understand why people are concerned that former subprime brokers are getting into the reverse mortgage business, I don’t think it will happen. Subprime brokers who are used to closing No Doc loans in 7 days aren’t going spend 60 plus days closing a HECM.