Reverse Mortgage Exec Responds: ‘No Basis’ for Civil Complaint

A former reverse mortgage executive and consultant has responded to civil charges of fraud levied by her former employer, saying they have “no basis” and that the executive was dropped by the company after the acquisition of a reverse mortgage servicer. This is according to court filings obtained by RMD.

In the civil suit, filed last month by Mortgage Assets Management, LLC (MAM) in the U.S. District Court of Massachusetts, the company alleges that former reverse mortgage executive and consultant Cheryl MacNally inappropriately directed MAM to spend millions of dollars with reverse mortgage firm Harbor View Consulting, while she maintained an ownership stake in Harbor View that had allegedly not been made known to MAM at the time the services were provided.

That is not the case, according to a response to the initial complaint filed by counsel for MacNally and Harbor View. The defendants contend that MAM was “fully aware” of an ongoing relationship MacNally maintained between herself and the consultancy, and that MacNally was essentially leveraged by MAM for her reverse mortgage industry knowledge and reputation to facilitate the purchase of Reverse Mortgage Solutions (RMS) from Ditech Holding Corporation last year.

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MacNally’s work allowed MAM to obtain approvals from the Department of Housing and Urban Development (HUD) and Federal Housing Finance Agency (FHFA) to acquire mortgage servicing rights (MSRs), the response reads. Once the acquisition of RMS was completed, MacNally explained that MAM remained understaffed, complicating the incorporation of RMS into its new corporate structure, the response explains.

“RMS would run independently and provide corporate services to MAM,” the response reads. “MacNally would be pushed out. Still unsatisfied with her ouster, MAM’s new guard now brings this baseless suit.”

The response goes on to deny the core allegations specified by MAM in its initial complaint. No trial date has been set, but both parties are seeking the relief of a jury trial.

Prior to her roles at MAM and Harbor View, MacNally served 19 years at Wells Fargo in which she worked as the national sales manager for the bank’s reverse mortgage division. She was elected co-chair of the National Reverse Mortgage Lenders Association (NRMLA) in July of 2010.

During a long and protracted bankruptcy proceeding by Ditech Holding Corporation last year, MAM was identified as a “stalking horse bidder” for reverse mortgage servicing company RMS before its sale to MAM was ultimately completed in late September 2019.

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  • As to knowing the relationship between the parties, this should be simple to dispose of if adequate signed and dated disclosure in writing was given by MacNally and Harbor View to MAM (assuming such document is free of any and all material alterations). Such disclosure would have been through a statement of conflict of interest signed by McNally, the highest ranking individual (other than McNally or relative of McNally) at MAM for MAM and the highest ranking at Harbor View [other than McNally, a relative of McNally, or the individual who signed for MAM, or a relative to that person) at Harbor View for Harbor View with dates by each signature that preceded any work performed for MAM by Harbor View. Without that signed and dated document declaring all actual and potential potential conflicts of interest between the parties, it would seem that McNally and Harbor View are open to lawsuits by MAM for lack of such disclosure. The disclosure would normally be given as a separate document (which is best) or in a contract of services to be performed by Harbor View which would have been signed and dated before any services would have been performed by Harbor View.

    So does such a statement of conflict of interest exist?

    There are other means of proving MAM had knowledge of conflicts of interest between MacNally and Harbor View but they are normally harder to demonstrate than the statement of conflict of interest previously described. Such disclosure is very common in today’s business environment, so it would be surprising if neither MacNally nor Harbor View had a signed and dated statement of conflict of interest in their possession.

    This case is even more interesting because of MacNally’s ongoing relationship with NRMLA’s Board as one of its past Chairpersons.

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