We reviewed Senior Reverse Mortgage Services, Incorporated (originator), a home equity conversion mortgage (HECM) originator. The originator originated loans for one of the largest lenders in Texas, Financial Freedom Senior Funding Corporation.

Our objective was to determine whether the originator complied with U.S. Department of Housing and Urban Development (HUD) regulations and adequately counseled borrowers and disclosed costs.

Generally, the originator complied with HUD regulations when it originated HECM loans. However, the originator could have improved its service by consistently following requirements to (1) adequately disclose the financial aspects of the loans to borrowers, (2) counsel the borrowers on other available financing options, and (3) complete documents. Because the originator did not consistently follow these procedures, borrowers may not be fully aware of the financial implications of the loans.

We recommended that the Assistant Secretary for Housing-Federal Housing Commissioner require the originator to implement procedures that ensure that it (1) provides at least two assumptions for at least two loan terms and two appreciation rates to borrowers; (2) provides a list of eligible counselors to the borrowers so that they can select their counselor; and (3) completes all loan documents.