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Regulator Opens Investigation of Reverse Mortgage Operations at RMS, Nationstar

The New York State Department of Financial Services (NYDFS) has opened an investigation into Reverse Mortgage Solutions, Inc. (RMS) and Nationstar Mortgage LLC, following multiple consumer complaints regarding reverse mortgages serviced or originated by the companies.

The complaints echo broader concerns regarding financial abuses specifically targeting senior citizens and abuses in both the origination process and the servicing of reverse mortgages, according to letters the NYDFS sent to RMS President Chris Mullins and Anthony Villani, executive vice president and general counsel at Nationstar, which is listed as doing business as Champion Mortgage Company in the letters.

Pursuant to Section 597 of the New York Banking Law, the NYDFS is asking both companies to provide a wealth of data on their servicing and origination activities since 2009.

Such data includes, but is not limited to, reporting the total number of reverse mortgages serviced and originated by RMS and Champion; the origination date of each loan; the originating party; whether the loan was a HECM or proprietary product; and whether any type of set-aside or escrow account was established for payment of taxes or insurance premiums.

NYDFS is also requiring both companies to report borrower-specific information, such as the age of the consumer at the time of loan origination; as well as their policies and procedures related to the treatment of a surviving spouse following the death of the principal borrower—both when the surviving spouse is included on the loan, and when the survivor is a non-borrower.

The investigation arrives a little more than one week after a story from the New York Post appeared, spotlighting there have been 27 complaints lodged with the NYDFS, the most of which belong to RMS and Champion.

If the NYDFS finds any wrongdoing, the regulator can issue RMS and Champion with fines of up to $2,500 per day, per violation, and revoke their licenses to operate in New York, the New York Post reported late last week.

“DFS is committed to protecting New York homeowners, and will continue to take necessary action to protect seniors who are targeted for reverse mortgages so they are not at risk of losing their homes,” said DFS Superintendent Maria T. Vullo, in the Post article.

Since its creation in 2011, the NYDFS has secured more than $6 billion in fines, including $7 million in fines from the mortgage industry.

Per its investigation into RMS and Champion, the NYDFS requires both companies to provide the requested information and all supporting documentation no later than August 17, 2016.

Nationstar, who told RMD that its policy is not to comment on specific regulatory matters, also said Champion Mortgage has never originated reverse mortgages in any state, including New York. Rather, the company is a servicer for these loans typically originated from large money center banks.

“We are proud of our industry leading track record of helping our customers stay in their homes and work with all regulators at the state and national level to ensure we’re treating our customers fairly and in accordance with the law,” a Nationstar spokesperson told RMD via email.

The NYDFS declined to provide RMD with a request for comment outside of what was mentioned in the New York Post article. RMS did not respond to a request for comment as of press time.

Written by Jason Oliva