Reverse Mortgage As a Business Opportunity

Interest in the reverse mortgage program has grown dramatically with lenders and brokers as rising interest rates have dampened conventional home loan originations and refinance activity.

Reverse mortgages not only provide additional fee income, they also offer lenders a way to promote community stability, receive favorable publicity and credit under the Community Reinvestment Act (CRA).

Reverse mortgages have been around in one form or another since the early 1960s. The product remained in relative obscurity until 1990 when the U.S. Department of Housing and Urban Development unveiled the federally-insured Home Equity Conversion Mortgage (HECM). The sector got another boost six years later when Fannie Mae launched its own reverse mortgage product, the Home Keeper.

HECM production accounts for 90-plus percent of the total market. To date, more than 200,000 HECMs have been originated in the U.S., including more than 43,000 in fiscal year 2005 and 38,000 in FY 2004.

The surging popularity of reverse mortgages can be attributed to several factors, including 1) greater consumer awareness of, and comfort with, the product, 2) increasingly tighter budgets caused by rising healthcare costs and lower returns on investments; 3) strength of the housing market with steady increases in property values and 4) more lenders offering the product.

As the national voice for the reverse mortgage industry in Washington, D.C., National Reverse Mortgage Lenders Association, or NRMLA, serves as an educational resource, policy advocate and public affairs center for reverse mortgage lenders and related professionals. NRMLA was established in 1997 to enhance the professionalism of the reverse mortgage business. In that capacity, NRMLA educates consumers, trains lenders to be sensitive to the needs of older Americans, enforces our Best Practices and Code of Conduct, and promotes reverse mortgages in the news media.

Dubious 'request' in the mail

Alot of junk mail masquerades as official documents. But a recent mailing from something called the National Data Research Center really takes the prize.

California seniors who are being targeted by the apparent scam should be especially vigilant. "2006 Government Regulated Senior Program," the mailer says in big letters. And in smaller letters: "New Government Program Protects Seniors."

The return address is given as 2020 Pennsylvania Ave. NW, Washington DC, which is just a few blocks from the White House. Opening the mailer reveals a pair of American flags and a "Senior Benefit Update" for people over 62. "FHA insured HUD regulated HOME EQUITY CONVERSION PLANS allows you to tap into your Home equity with NO MONTHLY PAYMENTS EVER!" the mailer declares with shaky grammar and punctuation. It explains that such plans can help people pay off existing mortgages or credit card debt, make home improvements or "enhance your lifestyle."

"It is your Legal Right as a United States Taxpayer to receive all the Information available to you," the mailer says (and few would argue the point). "Complete and Return this 2006 Request Form."

Recipients are then supposed to write their name, phone number, birth date and spouse's birth date on a detachable card and mail it back not to Washington but to a post office box in Dallas.

Why is all this so suspicious?

For one thing, there's no directory listing for a National Data Research Center at 2020 Pennsylvania Ave. in Washington.

An employee of one genuine tenant of the office building at that location, Courier America, said he knew of nothing at the site going by this name.

For another, the Oregon insurance commissioner issued a cease-and-desist order in 1997 to a Texas company called Acc-U-Lead, which was sending mailers to local residents that pitched insurance plans. The mailers included cards to be returned to the National Data Research Center at a post office box in Dallas. Oregon authorities identified the president of Acc-U-Lead as a man named Ronald Morgan.

"It was the same kind of thing as what you're seeing," said Steve Corson, a spokesman for the Oregon Department of Consumer and Business Services. "We were getting material that was packaged to look like it was from a government entity." He said the mailers were intended to dupe people into sending in personal info, which would then be sold to insurance firms for marketing purposes.

"It looks they're doing a similar thing now in California, except this time to generate leads for mortgage companies," Corson said.

The Texas comptroller's office said Acc-U-Lead's current status is "not in good standing" because the company repeatedly failed to file required tax information.

Texas records also identify Ronald Morgan as Acc-U-Lead's president and show that the company does business under a variety of names, including United States Senior Services, Citizens Consumer Benefit Services and United States Trust Co.

Most of the companies share an address in Richardson, Texas, near Dallas. That address also turns up in separate state records for Ronald Morgan, listed as currently residing in McKinney, on the outskirts of the Dallas metropolitan area.

In December 2003, the Texas attorney general's office issued a temporary restraining order to halt what it called deceptive practices by a Ronald Morgan of McKinney.

Morgan is alleged to have used something called the State and County Tax Redemption Center to send out official-looking mailers to seniors seeking a $55 fee for help with applying for a free tax benefit.

In late 2004, Morgan was ordered by a Texas court to pay almost $24,000 in penalties and fees. "We won't stand for this kind of deception against tax-paying seniors," Texas Attorney General Greg Abbott said in a statement.

Tom Kelley, a spokesman for the attorney general's office, said Texas officials will investigate whether Morgan is behind the California mailers and whether he's in violation of his court order.

"We think it's him," Kelley said. "It looks like he's targeting seniors again."

I called a number listed for Morgan's McKinney home. A man answered.

I identified myself as a California journalist and asked to speak with Ronald Morgan.

After a brief pause, the man replied, "There's no one here by that name." And he hung up.

Recipients of the National Data Research Center's latest mailer should keep all this in mind before replying.

Remember, it's your Legal Right as a United States Taxpayer to receive all the Information available to you. And now you have.

David Lazarus' column appears Wednesdays, Fridays and Sundays. Send tips or feedback to dlazarus@sfchronicle.com