Reverse Mortgage Fraud Prosecutions
🔍 What is Reverse Mortgage Fraud?
Fraud related to reverse mortgages, which allow seniors to convert home equity into cash.
Common schemes:
Falsifying borrower income or residency status.
Misrepresenting property condition or value.
Using forged documents or straw buyers.
Misappropriating loan proceeds.
Prosecuted under:
False Claims Act
Wire Fraud (18 U.S.C. § 1343)
Mail Fraud (18 U.S.C. § 1341)
Mortgage Fraud statutes
HUD regulations
📚 Detailed Case Law on Reverse Mortgage Fraud Prosecutions
1. United States v. Mary Lee Reeder (2015)
Facts:
Reeder was a loan officer who submitted false documents and inflated borrower income to obtain reverse mortgage loans for unqualified applicants.
Colluded with appraisers and real estate agents to overvalue properties.
Used forged signatures on loan paperwork.
Charges:
Wire fraud.
Mail fraud.
False statements to HUD.
Outcome:
Convicted in federal court.
Sentenced to 5 years in prison.
Ordered to pay restitution of over $1 million.
Significance:
Demonstrates how insiders manipulate the system to get fraudulent reverse mortgage loans.
2. United States v. David Walker (2018)
Facts:
Walker operated a mortgage brokerage that engaged in reverse mortgage fraud by falsifying borrower occupancy and age.
Submitted false HUD forms to secure loan approval.
In some cases, borrowers did not reside in the homes listed.
Charges:
Wire fraud.
False statements.
Conspiracy.
Outcome:
Pleaded guilty.
Sentenced to 4 years.
Restitution ordered exceeding $2 million.
Significance:
Focus on falsifying borrower eligibility requirements in reverse mortgages.
3. United States v. Estate of Margaret Jones (2017)
Facts:
Fraudsters forged Jones’s signature to take out a reverse mortgage on her home without her consent.
Used forged power of attorney documents.
Loan proceeds were diverted to third parties.
Charges:
Mortgage fraud.
Identity theft.
Wire fraud.
Outcome:
Perpetrators convicted.
Property liens were placed.
Restitution to Jones’s estate.
Significance:
Highlights identity theft and forgery risks in reverse mortgage fraud.
4. United States v. Ronald and Lisa Montgomery (2019)
Facts:
Couple operated a reverse mortgage fraud scheme by recruiting elderly homeowners to apply for loans and siphoning proceeds.
Misrepresented loan terms and fees to victims.
Submitted false income and occupancy documents.
Charges:
Mail fraud.
Wire fraud.
Conspiracy.
Outcome:
Convicted and sentenced to 6 years (Ronald) and 4 years (Lisa).
Ordered to pay millions in restitution.
Significance:
Example of a “foreclosure rescue” scam linked to reverse mortgages.
5. United States v. Alpha Mortgage Group, Inc. (2021)
Facts:
The mortgage company falsified borrower income, inflated home appraisals, and failed to disclose loan terms.
Submitted fraudulent documents to HUD.
Caused hundreds of thousands of dollars in losses to the government insurance fund.
Charges:
False Claims Act violations.
Wire fraud.
Mortgage fraud.
Outcome:
Settled for $3.5 million.
Corporate probation and internal compliance measures imposed.
Significance:
Corporate liability for systemic reverse mortgage fraud.
🔑 Key Takeaways
| Case | Fraud Type | Charges | Outcome | Key Lesson |
|---|---|---|---|---|
| Reeder | Loan officer falsification | Wire & mail fraud | 5 years, restitution | Insider manipulation risk |
| Walker | Borrower eligibility falsification | Wire fraud & conspiracy | 4 years, restitution | Importance of occupancy rules |
| Estate Jones | Identity theft, forgery | Mortgage fraud & identity theft | Conviction, restitution | Risk of forged documents |
| Montgomerys | Elderly exploitation | Mail & wire fraud, conspiracy | 6/4 years, restitution | “Foreclosure rescue” scams |
| Alpha Mortgage | Corporate false claims | FCA, wire fraud | $3.5M settlement | Corporate accountability |
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