Financial Services Bill Provides Grants to Protect Seniors from Fraudulent Marketing

The Wall Street Reform and Consumer Protection Act of 2009 that passed the House earlier this month, contains a provision that calls on the Securities and Exchange Commission (SEC) to provide grants for states to investigate and prosecute misleading and fraudulent marketing practices.

HR 4173 also allows those grants to be used to develop educational materials and training aimed at reducing misleading and fraudulent marketing of financial products toward seniors.

The grants, of no more than $500,000 per state per fiscal year, can be used for a number of things. These include:


(1) to fund additional staff to identify, investigate, and prosecute (through civil, administrative, or criminal enforcement actions) cases involving misleading or fraudulent marketing of financial products to seniors;

(2) to fund technology, equipment, and training for regulators, prosecutors, and law enforcement in order to identify salespersons and advisers who target seniors through the use of misleading designations;

(3) to fund technology, equipment, and training for prosecutors to increase the successful prosecution of those targeting seniors with the use of misleading designations;

(4) to provide educational materials and training to regulators on the appropriateness of the use of designations by salespersons and advisers of financial products;

(5) to provide educational materials and training to seniors to increase their awareness and understanding of designations; and

(6) to develop comprehensive plans to combat misleading or fraudulent marketing of financial products to seniors.

The bill would allocate $8 million dollars each fiscal year between 2011 and 2015.

HR 4173 also includes an amendment which requires the new Consumer Financial Protection Agency (CFPA) to oversee the reverse mortgage industry to ensure seniors are not exposed to unfair and deceptive practices.

The bill still needs to pass the Senate before it becomes law.

Write to Reva Minkoff

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  • These portions of the bill are little more than a soap box platform for those who voted for it. $8,000,000 for 50 states is a very low amount to combat fraud against seniors. Since well over 6% of the senior population resides in California alone, $500,000 is not even proportionate to the senior population in this state. Add to that the higher costs in California for most goods and services, and the funding begins to look like a drop in the water between San Pedro, California and Santa Catalina Island, California. It is nothing more than wasted money and efforts resulting in a big and bored yawn.

    How this new commissioner will find the time to regulate reverse mortgages is a bigger yawn. However, the potential for regulations that will harm the industry is enormous. Let’s hope the Senate pares down the specific portions of this bill dealing with reverse mortgages or more appropriately directs the oversight to HUD with perhaps some supervision by the new commissioner, although the latter also seems like overkill.

  • Ummmm let's see: This may be another step in the right direction, the devil is in the details. For example, take item one–I received a call from an 85 year old client who received telephone calls (“A really nice man, Jim”) and,
    then, paperwork based upon the Federal Stimulus Law which would give her more money. I suspect this materal is nothing more than a FHA HECM Refinance but won't know until I receive her documents. (She says I”m her “expert” and won't do anything until I review and explain what it is she is being offered.) A sneaky way to solicit business, I suspect. Next Item four: Designations– NRMLA's CRM for sale for ONLY a thousand dollars. Whoopty Do!!!! Another Peter (…) (……) Bell RIP-OFF. Not to mention my very own CRUM for only $25.00. (I found a printer who used to try every few years to duplicate old George's face on little pieces of paper just to get free room and board who will print a dandy Membership Card with gold ink, really impressive especially for Seniors who suffer from Macular Degeneration.

  • Jamesanelson,

    You seem to be quite an angry man when it comes to just about anything regarding the reverse mortgage industry these days.

    Let me correct some of the misinformation floating around the RMD blog (including your most recent post)regarding the NRMLA designation.

    First of all, the designation is accredited (meaning that the entire program including testing, c/e requirements, etc) must meet external, accepted and credible standards (I could be wrong, but I believe that the standards are dictated by the American National Standards Institute – “ANSI”). The designation, in the eyes of NRMLA, is intended to be a very meaningful designation that will assure the potential borrower that they are dealing with a professional who in knowledgable in their field of work, dedicated to their profession and the customers they serve, and who subscribes to the type of ethical behavior that is called for by NRMLA thru its Code of Ethics and Professional Responsibility.

    Lastly, if you look at the cost of obtaining the designation, assuming that a candidate doesn't fail the test and have to incur the add'l cost of a second exam, then it is very fairly and resonably priced when compared to other professional designations knowing that it is good for 3 years.

    Every aspect of the designation has been researched, deliberated, and decided upon by a group of your peers who have volunteered countless hours over the past 18-24 months working on this project. NRMLA has invested a significant hard dollar investment and countless man hours to create this designation as well. I don't understand why you think that this designation is, in your words, a “Peter Bell RIP-OFF”. What is the basis of your personal attack??

    FYI…. I am currently the Co-Chair of the NRMLA Board of Directors, and have served on the BOD at the will of the membership for the past 6 years. I am always willing to speak with anyone about the CRMP designation or any aspect of our trade association, and I can be reached at 508-429-6271.

      • I will be out of the office starting 12/31/2009 and will not return until

        The information contained in this message may be CONFIDENTIAL and is for the intended addressee only. Any unauthorized use, dissemination of the information, or copying of this message is prohibited. If you are not the intended addressee, please notify the sender immediately and delete this message.

  • Expect a phone call, fellow/Lady?, soon: I don't object to any move that enhances the integrity of the FHA HECM Industry–it's the $1,000 fee that I think is rotten to the core. Is your Company going to pay that fee for your employees? As far as Peter (…) (……) Bell: I distain any and all lobbyists.
    I tell you the same facts I stated to others on this blog. Namely, The United States should have Term Limits for Congressmen; Tax Payer Funded National Elections; and all Lobbyists should be banned from Washington, D.C. for at least 500 miiles. What's more, any Lobbyist caught greasing the palm of Federal Officials (under the guise of campaign funds) should receive a mandatory five year jail term.

  • To Mr. James Veale, CPA: Esteemed Sir, I just got off the phone with a distinguished member of one of our leading Reverse Mortgage Banks. (A man who said he had personally originated over 900 actual Reverse Mortgages in his career as a loan originator, before mioving to Mangement, . WOW, I'm impressed!) He stated that in a conversation with you, you stated
    after a Seniors death (or leaves the home perminently) if the homes sells for less than the mortgae debt, the IRS absolutely never considers the difference between the debt and the home value as income to the borrower
    I said I thought that wasn't your position. I thought you said the IRS MAY–it depends upon the Heir's tax situation. The Heirs must consult with a Tax Advisor. He said the IRS considers that money just like proceeds from a
    Life Insurance Policy; thus, absolutely no tax under any circumstances.
    What is your position, Mr. Veale please.

    • Mr. Nelson,

      Your caller is wrong.

      At the NRMLA convention in November 2007 also in San Diego, a retired IRS estate tax attorney, Mr. Steve Diamond, and I spoke on the tax implications of reverse mortgages to borrowers. At our first preparatory meeting, Mr. Diamond strongly disagreed with my position. His wife who is a senior advocate was furious.

      By the time of the convention, Mrs. Diamond understood that our positions on the fairness of the tax differed very little. Mr. Diamond had researched my position and could not find anything to challenge it but he firmly believed the IRS would never assess any income tax as a result. In the last year, after some discussion with IRS personnel, Mr. Diamond has reached the decision that indeed the tax would be assessed.

      There are those who believe that the IRS has ruled that reverse mortgage proceeds can never be subject to income tax. However, there is no such public or private ruling or determination. None who promote this position have ever provided documents verifying their claim.

      Finally, some who claim to have been audited by the IRS on foreclosed FHA forward mortgages have declared that the IRS agreed that if the FHA is paying off the loan and since the borrower paid for that insurance, there should be no income tax on foreclosure. When asked why the insurance proceeds would not be taxable, they shrugged their shoulders. Asking if they had argued about it being equivalent to life insurance, they struggled with a “yes.” These kinds of stories are both specious and plausible. Plausible, because there are IRS agents who reach the wrong answer everyday. Specious, because such stories are not verifiable under the Freedom of Information Act and tax laws.

      It is true that I have discussed all three theories with several individuals but they are not theories I promote or support. In my view all three are significantly flawed and cannot be sustained with a competent IRS auditor who understands the laws on point.

      As to decedents passing away after 2009, the rules on the estate tax, the inherited basis of property for income tax purposes, and other issues will change substantially, unless Congress changes them retroactively. The President campaigned to change them and the House has already acted to do so. The House bill is probably insufficiently “Republican” to pass in the Senate without significant amendments. I believe a retroactive change will take place in the first quarter of 2010 but who can predict the actions of Congress?

      How the tax law will read as to the estates and revocable trusts and any related assets of those who pass away after 2009 is unclear. However, as to decedents passing away before 2010, the tax law is clear; if the balance due on any foreclosed reverse mortgage exceeds the fair value of the home that served as security for that loan as the date of the death of the decedent, a taxable gain results.

      For example, a decedent passed away on June 1, 2009 and on that date the fair market value of the home was $120,000. On January 7, 2010, the home was sold in foreclosure for $140,000 but the balance due on the HECM was $210,000. Normally a gain of $20,000 would result except $70,000 of the balance due on a nonrecourse loan was forgiven in the process. Despite FHA insurance proceeds of $70,000 being paid to the lender, the gain is $90,000 to the estate, heir, trust, or beneficiary.

  • Yes, for people like The_Critic who are charitable enough to spend their working hours enlightening the RMD crowd instead of using that time to sell old people reverse mortgages, $1,000 is like, wow, a ton of green.

    For those who make their profession a career, $1,000 shouldn't be very much.

    The Critic and Mr. Nelson are amateurs…

    • comeondude,

      NRMLA would be happy for you to provide scholarships for those in our industry who cannot afford the price of the credential. You are very generous. There are many who comment and do not comment on this website who are very worthy of such consideration.

      The National Reverse Mortgage Lenders Association (NRMLA) is located in Washington, DC. Your charity would be most appreciated. It is thoughtful of you to mention charity at this time of year. Your donation will not be tax deductible but it will go towards a worthy cause — the future career of a fine man or woman who is helping seniors find the cash they so desperately need every single day.

      Happy New Year!!!

      • The problem is, Critic, scholarships are meant to better the world by providing a leg up to people who are worthy. Why would someone provide a scholarship to a loser gasbag like yourself who will only interface with maybe 12 seniors over the course of the year anyway?

        Your education would be spent enlightening a bunch of RMD readers who don't care what you say anyway as to how so and so's newspaper article called something income or a loan or whatever, as if the seniors your industry services are so goddamned stupid they don't know the difference.

      • comeondude,

        Hey if that is all of the seniors I meet with in a year, I have not originated a single HECM. I see at least that many every single day. I am a senior, living in a senior dominated area!!!!

        Designations are for much younger people than me. Why don't you get one? Make sure that you mark on that $12,000 check made payable to NRMLA that the scholarships must go to someone under 40. Absolutely no one would mistake me for that young.

        I encourage you to put your money where it will count.

  • Critic, you've shed some light on the subject:

    I mentioned, “as if the seniors your industry services are so goddamned stupid they don't know the difference.”

    You mentioned “I am a senior, living in a senior dominated area!!!!”

    No wonder you seem to believe seniors are a bunch of idiots. Let me reassure you, though, that not all are as feeble minded as you.

    Before you run around suggesting I make out checks to help educate younger versions of your idiot self, let me remind you that there are children starving in Africa.

    • comeondude,

      Feed those children. There are also starving children in China, India, and throughout most of the remaining parts of Asia. So please give that $12,000 to such causes.

      You are a very injured man. You lash out at counselors calling them animals. You expreseed your hatred for seniors and you slander others.

      The hardest thing in life is to build up. Your goal is to tear down. Your skills and abilities are going to waste. It is sad.

    • Please let us know (and while your at it whatever other teen-age forums fortunate enough to benefit from your wisdom and pithy remarks), which African charities and how much you contribute. You are correct they could use the money more than those in the RM industry. However, since you place so much emphasis on your sales production prowess, you should give a tithe to those charities. Perhaps a trip to Africa would allow you to benefit from some of that education, and knowing the Africans way, they also teach civility and respect for peers.

  • Thank You Mr. Veale: Perhaps you need to further enlighten the distinguished Gentleman Mr.Demarkey at Snoopy Dog's Reverse Mortgage
    House. Common dude calls me an amateur and in may areas I truly am; however, even a leader at NRMLA can be wrong once in a while (even after an outstanding career of personally originating over 900 Reverse Mortgages. WOW!).

    • Mr. Nelson,

      If Mr. DeMarkey told you that my position is as you say, then I apologize to Mr. DeMarkey because I believe that is what he heard even if my intent was otherwise. Mr. DeMarkey is a careful, considerate, and truthful individual. So it is good you called me out on this topic to clarify my position.

      I have met many good and respectable people in our industry through NRMLA. Mr. DeMarkey is just one. Like Mr. DeMarkey, I have never understood your strong reactions regarding Mr. Peter Bell. Mr. Bell is a great representative for our industry. You really should try to get to know him. I respect him and what he does for the industry even though I do not always agree with him.

      I just finished reviewing the 2008 Form 990 for NRMLA that was filed some 8 months ago. The entire income of NRMLA for that year was about $2,500,000 from all sources which includes members’ dues, conventions, and all other sources. The cost of conventions was well over $500,000. Rent and office expense in DC was not cheap. Reportable lobbying costs were about 5% of their total income; their legal fees are about twice that. And yes their financial statements are audited per the Form 990 and a CPA firm prepared the 2008 Form 990 filed with the IRS. No one gave me this information nor is it a secret; it is public information.

      Over the last few years, I have looked at the Forms 990 of NRMLA for the last three years. NRMLA is a small organization that is doing OK but its revenue base is about 0.2% of that of AARP. The President of AARP reportedly made over $1,000,000 from AARP last year.

      Our company is a member of NRMLA and the MBA. I can tell you the one which has helped our industry and the one that I have yet to figure out how they are helping the industry (and it is not NRMLA). The MBA represents our firm well on the small forward side to our business.

  • Yes indeed, Mr Demarkey and I had a good conversation; I was very impressed with his Reverse Mortgage Loan Originating background and
    honest, forthright comments. We did agree to disagree on several points, one of which involved you. It will be interesting to learn if he says I was correct in repeating what I thought he said about the FHA HECM Insurance
    proceeds. (absolutely tax fee like Life Insurance proceeds.); I really have no doubt that he will since I am sure he is an honorable Gentleman. Frankly, I was hoping he was right and I heard (read) you incorrectly. I still think this is
    something the Senior should gain through what he pays for FHA HECM Insurance. Unfortunately, until the IRS rules that to be the case (or Congress and the President changes the law or regulation), I will be unable to make that claim to my Senior clients. As far as my so called Peter (…) (…..) Bell vendatta: I like what one of the greatest Presidents this Country ever had said one time–“If you can't stand the heat, get the hell out of the kitchen.” As far as “getting to know him”, what's wrong with his getting to know me? I detest Washington D.C. stuff shirts who think they are a whole lot better than those poor pilgrims out in the Countryside. His holier-than thou attitude about my extremely course two word reaction to an idiot blogger on RMD was uncalled for, just as my words were. If he had said something like “Mr Nelson, though we appreciate your right to blog, please try not to let your logger background show quite so much. ” Instead his atttitude in my opinion was one of “I'm a whole lot better than you and Big Daddy head of NRMLA knows what's best for everyone and everything in this Industry.” He can pontificate all he wishes, but until he gives me reason to think otherwise, he will always be Peter (…) (……) Bell to me. Frankly, a great many people in Washington D.C. have the same attitude and our Country is the worse for it. As far as AARP, I've always said I wonder what that group does with its money–and so do a lot of other Seniors. By the way, one other point over which Mr Demarkey and I disagreed was what I consider the NRMLA CRMS designation $1,000 rip off. What is your position on that subject, I'm curious?

    • Mr. Nelson,

      I was not on the original committee that formulated it but I was among those who did the initial work in Florida.

      If the designation had been finalized in 2008, it would have been a more valuable designation than it will be in the Spring of 2010. Its emphasis is much different than what was originally presented.

      Without significant marketing, it will take years before its value can be appreciated. To recup past costs and market properly, finances are needed. If it brings in one more loan in a three year period, it would be more than worth it to me. I think the high cost argument needs to be balanced with the possibility of more completed sales.

      With quality credentials and a lot of gray hair, I am unclear about its value to me personally For someone who is in their early thirties with few or no quality credentials, it could be very, very valuable. Again its value in part depends on the value which seniors attach to it. Marketing certainly will help close the time gap on how long the value recognition process will take.

      If there is little marketing of the credential it will not have the value it could. So if participation is high, the ICC should have the financing needed to market it and gain recognition of value rather quickly.

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