HUD Investigates Financial Freedom Production

image The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General, audited Financial Freedom Senior Funding Corporation (Financial Freedom) and found that they did not fully follow HUD’s reverse mortgage requirements for loans in the San Antonio, Texas area. 

According to the report, Financial Freedom generally followed HUD reverse mortgage requirements for the borrower’s age and completion of a counseling program for the 10 loans reviewed, but it did not fully follow other requirements for five of the loans totaling $753,000 said the report. 

Financial Freedom originated one ineligible loan for a home that was not the borrower’s primary residence, one loan for a home that the borrower no longer occupied, and three loans that had issues with repairs. Most of these conditions occurred because Financial Freedom’s underwriters did not follow up on conflicting information or properly interpret HUD’s requirements.


The OIG recommends that the Assistant Secretary for Housing-Federal Housing Commissioner cancel the mortgage insurance on the ineligible loan, require Financial Freedom to contact the borrower and ascertain the occupancy status and if the borrower no longer lives in the property seek repayment of the ineligible loan.

Also, require Financial Freedom to ensure that the repairs have been completed for two loans, consider administrative action against an inspector if warranted, and require Financial Freedom to issue guidance to its underwriters on repairs affecting the health and safety of the occupants or the security and the soundness of the property.

In the report, Financial Freedom responded that:

Of the 5 loans specifically identified, we disagree with the findings on two of the loans and are in general agreement with the findings on the 3 loans related to repairs in that going forward if we are to waive repairs per Mortgagee Letter 05-48, we will obtain additional documentation from appraiser if the severity of the repair is not specifically addressed.

In regards to verifying that the address is the borrowers primary residence, Financial Freedom agrees that the underwriter did a poor job of documenting the discrepancies in addresses but based on the documentation contained in the file, they feel it’s evident that the borrower resided in the subject property.

OIG’s response:

Financial Freedom disagreed that borrower did not live at the subject property, but agreed it was poorly documented. We affirm our original conclusion as the borrower’s driver license address, which is a rural post office box address, is not the insured property address and the addresses are 40 miles apart.

Audit Report No.: 2009-FW-1012

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  • So, the folks at FF in that neck of the woods are so incompetent that 50% of audited loans had grievous errors?

    That's the funniest thing I've heard all day (well, it's been a quiet day!)

    You folks originating out there in San Antonio better not be beaten by these bozos. HAHA!

  • Let's see, Financial Freedom has about 150,000 reverse mortgages in their portfolio and this audit is news? It's one big fat “yawner” if you ask me!

    • The news is that HUD is looking at these details which sends a notice to the industry to be more careful when approving and conditioning a loan.

  • I'd love to see some of the reports and audits on BAC and Wells. I've looked at several for refinancing and they had no sidding and roof's were tar paper. Going after one lender on this is sort of comical.
    It would be nice if the rules were clear and logical so we could actually help those that deserve and need help with these loans.

  • Guys this is not news. This was a spot audit done by a local office, you better be careful before you throw stones. Alot of originators live in glass houses.

    I think it did a disservice to a good company to post such a sensational headline.

    FF is a good company, as are Wells and BA.

  • The lesson here is that HUD looks very closely at these loans and there is little room for error. Any lender could have had the same result, especially ones doing high volume like FF. Most, if not all of these problems would have been avoided if additional documentation would have been requested.

    Moral of the story: Document, Document, Document…. and the next time your underwriter or wholesaller asks for more, get it.

    • Well spoken Steve. Steve is an excellent trainer of how and what to pay attention to when it comes to reverse mortgages. Production, while highly important, should not compromise good prudent underwriting.

  • We just started advertising Reverse Mortgages and I just closed the first with the company…with wells…so tell me who do you think is the best company to run reverse mortgages through? I want my borrowers taken care of….

  • I'd feel a lot better about this if I knew why San Antonio and why only 10 loans. Are we supposed to think this is representative? How were the 10 selected–did they have suspicious characteristics? And lastly, were the defects only in documentation or were the issues real? The HUD inspectors do nothing but documentation, they generate miles of paper but otherwise produce nothing useful. It's the mortgage companies and originators that actually take the programs and help people. They can't put as much time into documentation as a HUD worker would expect or nothing would ever happen.

    • Property condition (repairs) and occupancy are the two most important aspects of the HECM reverse mortgage and as such should be analyzed and documented when required. You can't just hope it will work out.

  • I worked as a FF underwriter and, GUARANTEED- we cancelled more loans for occupancy than you would believe.

    I would have to say our underwriting processes were much more in depth than your JB and Wells paper, since those are usually the refinances we see.

    This article is awfully fishy. Hope One West investors work through this. Underwriters aren't perfect (especially FF underwriters in Atlanta), so saying they've overlooked or missed something isn't unlikely. Saying that 50% of their funded loans are, is a gross misrepresentation in this article. Sad.

    • Don't cast stones. That never solves anything. You should always take the high road and worry only about your job and your company. If you haven't worked for a particular company, who are you to speak of them.

  • Don’t cast stones. That never solves anything. You should always take the high road and worry only about your job and your company. If you haven’t worked for a particular company, who are you to speak of them.

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