FHA Takes Action Against Reverse Mortgage Lender for Advertising Practices

The Federal Housing Administration’s Mortgagee Review Board (MRB) announced yesterday that it was taking action against Cooper and Shein, LLC (dba Great Oak Lending Partners) for misleading advertising practices.

The Timonium, MD based lender was placed on probation for a period of six months and the MRB imposed a monetary penalty in the amount of $11,000.  RMD has learned the “misleading advertising practices” stem from the reverse mortgage side of the business.  According to information obtained from the Department of Housing and Urban Development, Cooper and Shein was issued two violations. 

The first for sending out correspondence to a homeowner advertising or soliciting participation in the HECM program using materials which implied it was either from or endorsed by HUD/FHA.


1. GOLP improperly used a simulated government form and seal to imply that correspondence is from or is endorsed by HUD/FHA.

GOLP disseminated correspondence to a homeowner advertising or soliciting participation in the Department’s Home Equity Conversion Mortgage (HECM) program.  The correspondence, which was in the form of a customized form-letter, implied it was either from or endorsed by HUD/FHA.  Specifically, the communication set forth a return address of “HECM Disbursement Authority, P.O. Box 121, Washington, DC 20002,” along with a simulated government seal, implying that correspondence was mailed from an official government entity in Washington, DC.  Furthermore, the notations on the letter simulated an official Federal government form, such as, “Form 792-B Eligibility Notification,” “HECM-1030 Benefit Allotment,” “Reinvestment Initiative”, and a “Claim Number,” further implying a government origin.  Refer to HUD Handbook 4060.1 REV-2, Chapter 2.

The second violation issued was for misleading the consumer by containing incorrect or misleading information in the correspondence.  

2. GOLP distributed a misrepresentative advertisement that contained incorrect or misleading information.

In addition to being printed on a simulated government form, the correspondence further misled the consumer by containing incorrect or misleading information.  Specifically, the form misstated HUD HECM program requirements, implying the recipient of the letter was entitled to monthly benefits from the HECM program, contrary to HUD program requirements.  GOLP advised the recipient that “[t]his is to inform you that you are entitled to monthly benefits under this program” [emphasis added] and that “[t]he benefits reserved by this office must be claimed or reserved by you on or before November 6, 2009.”  These statements misrepresent the HECM program and mislead consumers as HECMs are mortgages, not benefits and HUD’s authority to insure HECM’s is not expiring as of that date.  For these same reasons, participation in the HECM program cannot be “reserved” or “claimed” through GOLP as suggested in the letter.  Moreover, the Department has also confirmed that the Post Office box identified by the GOLP is an invalid address.  The statements contained in the form letter are inaccurate and/or misleading, and violate HUD requirements.  Refer to HUD Handbook 4060.1 REV-2, Chapter 2.

RMD contacted Cooper and Shein, LLC and learned the violations stem from a limited distribution (only 100 pieces) mailing that was used solely by one employee acting independently without any knowledge or approval from owners and managers of the company.

“This employee was contacted by an outside marketing and mailing company and he was assured that the mail pieces were fully compliant with all state and federal laws,” said Joshua B. Shein, Managing Partner at Cooper and Shein in an email to RMD.

According to Shein, the marketing company handled all aspects of the piece including design, language, preparation, and mailing.  After learning of the violation, management immediately initiated a proactive approach to stop all current mailings and to ensure it never happens again.

When asked for a comment regarding HUD’s decision to fine and put Cooper and Shein under probation for 6 months, Shein wrote:

We are extremely disappointed with the outcome of this HUD decision, as it was the result of the unapproved actions of one employee acting independently. There was absolutely no intention to violate any rule. We take compliance on the State and Federal level with the utmost seriousness. We have been in business since 2001, HUD approved for more than 6 years and have no prior offenses or violations with HUD.

These type of mailings continue to be a problem for the industry as a whole and often the marketing and direct mail partners are to blame.  However, the responsibility is still on the lender/broker to ensure the pieces a third party is sending out to customers on behalf of them are compliant.

RMD did ask for the name of the marketing company but Shein was told on the recommendation of its attorney not to share this information at this time.

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  • It is hard to believe the facts were strictly as management presents them. The punishment does not fit the violation. It is very doubtful if the full story is contained in the article above although there is little doubt of the accuracy of the reporter or that any significant information that was available as of release was left out.

    If management did not require a review of all marketing pieces before distribution, the penalty and suspension were earned whether this was the first detected violation or not. If the company was the least bit vigilant in enforcing an “all marketing must be reviewed” policy and could have shown rejected marketing as evidence, when looking at the fact pattern in other cases and the related punishment, again this verdict seems harsh.

    It is difficult to imagine how one piece of a 100 mailing piece distribution would end up in the hands of HUD. From a probability standpoint, this seems like a virtual impossibility.

    Why the promoter of this kind of marketing cannot be punished is ridiculous. If they guaranteed compliance with HUD, it seems the originator and the company would be suing for the amount of dollars lost including lost profits. If the marketing firm is not made to pay for its warranties then we as an industry are the losers.

    Even if the originator were performing a test of the claims of a marketing firm, how would a mailing of 100 pieces provide any proof of the product? We would all jump for joy if our close rates on such marketing even approximated 1% of the mailers sent. There is far too much information missing from this story.

    No doubt some of the missing information has to do with the concerns of legal counsel.

    • “It is difficult to imagine how one piece of a 100 mailing piece distribution would end up in the hands of HUD. From a probability standpoint, this seems like a virtual impossibility.” You state in your critique how it is a virtual impossibility that one would wind up in the hands of HUD. If one of the 100 had any sense he would mail it to HUD just as I am about to do since I received a similar invitation for all the “benefits” that come with this great program from another group. The words reverse mortgage are nowhere to be found on the paper but all I have to worry about for the rest of my life is the taxes on my home and the usual living expenses. I thought automobile salesmen were the worst leaches till now for this group has replaced them in my estimation and should be strung up.

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