The state Division of Banks has ordered five companies to stop peddling reverse mortgages to elderly homeowners, charging they are not properly licensed to sell the product in Massachusetts.
Reverse mortgages allow seniors to take a loan on their homes to be paid back when they sell the property or die - a helpful financial instrument for some seniors. But such loans are sometimes used as tools for fraud that leave elderly property owners without the money or their homes.
The Division of Banks this week ordered the following companies to stop doing business in Massachusetts until they obtain a license: Eldervantage LLC in Minnesota; Lender 411 LLC in California; Senior Reverse Mortgage Online in Texas; and in Nevada, Reverse Mortgage Helpdesk and Reverse Mortgage Site. None of these companies are accused of fraud.
“We’ve asked them to sign an affidavit indicating they have stopped these practices,’’ said David Cotney, the state banking commissioner. “In addition, if they are licensed in other states, we will notify regulators [there] that they are operating in Massachusetts illegally.’’
Representatives at both Lender 411 and Senior Reverse Mortgage Online said they had not received the order from the state to cease activity. But they added that they are referral services, not lenders.
“We connect consumers who are looking for mortgages with professionals,’’ said Rocky Foroutan, of Lender 411.
The other companies did not respond to requests for comment.
The state has increased its scrutiny of reverse mortgage lenders in recent years, as the recent recession and housing crash have left some homeowners struggling to make ends meet. Since 2009, the banking division has issued 24 enforcement actions related to reverse mortgages, which are for homeowners in their 60s and older.
Some questionable lenders and brokers are “basically promising people they can have free money to take vacations,’’ said Cotney. “They’re promising people that they won’t be kicked out of their homes, or foreclosed on.’’
Reverse mortgages can be useful in some situations, advocates say: maybe a senior on a fixed income needs financial help to remain in his or her home a bit longer, or to pay a large medical expense.
The state doesn’t track reverse mortgages, but in the first six months of the year just under 1,200 reverse mortgages had been approved in Massachusetts through a federal program that insures the loans, according to the US Department of Housing and Urban Development.
State officials and consumer advocates, however, warn that reverse mortgages can be complicated, and are not appropriate for most elderly homeowners.