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APPENDIX II

Gillespie Complaint to HUD, August 9, 2012


U.S. Department of Housing and Urban Development (HUD)
RE: Reverse Mortgage Solutions, acct./loan no. 68011002615899
Exhibit 22

HUD final settlement statement, HECM, June 5, 2008

Exhibit 23

Email from Liz Baize, Park Ave Bank, problem with documents, June 10, 2008

Exhibit 24

HECM Notice of Right to Cancel, June 5, 2008

Exhibit 25

Fax to RMS, dispute the delinquency and foreclosure, June 19, 2012

Exhibit 26

Bank Failure, Geoorgia Dept. Banking closed Park Ave. Bank, April 29, 2011

Exhibit 27

FDIC, receiver for Park Ave. Bank, April 29, 2011

Exhibit 28

FDIC, Park Ave. Bank, Consent, 09-084-WA/RB-HC-SM, July 14, 2009

Exhibit 29

San Jose Business Journal, Financial Title Shuts Down, July 30, 2008

Exhibit 30

Genworth lures Liberty Reverse Mortgage with $50 million, July 29, 2007

Exhibit 31

Durable Power of Attorney, Neil Gillespie, February 21, 2006

Exhibit 32

HECM Mortgage, with INTERLINEATION

Exhibit 33

HECM Second Mortgage, with INTERLINEATION

Exhibit 34

Tom DeBeauchamp, BofA FedEX label, January 15, 2009

Exhibit 35

Negative growth reimbursement check, $38.89, January 6, 2009

Exhibit 36

Reimbursement check, $133.38 January 6, 2009

Exhibit 37

Letter, Karen Yantis, BofA, RE: Negative Growth, January 14, 2009

Exhibit 38

Liberty Reverse Mortgage, Fla. Div. Corp., 2008 Annual Report

Exhibit 39

Liberty Reverse Mortgage, Fla. Div. Corp., 2008 name change to Genworth

Exhibit 40

HUD: $1 BILLION TO BE PAID BY THE BANK OF AMERICA

Exhibit 41

HUD Rev. Mortgage Handbook, B.10 Reviewing Clients Level of Understanding

Exhibit 42

General Allegations, HUD, breach of Fiduciary Duty, Predatory Lending

FORM APPROVED
OMB NO 2.502-0265
U.S. DEPARTMENT OF HOUSINO AND URBAN DEVELOPMENT
SETILBMENT STATEMENT

~.

TYPIOP LOAN 1. ...)(_ FIlA 1- _PIIIilA


3.
Cl:lHV. VI'llNS.
4.
VA 3.
COHV,IIIS.
J. 1'lLlI1I1JMB1IIl:
17.LOANNUMBIIIl:
39100

:;1~':'~uaANOICAlINUMBIlI\:

NOTE: This form is frmlished /0 rlWl you a ItaJulwnt ofQCtuall~IIIntMtCOlli. Amovnll paid to and by off/tlllntmt armt an Ihown.
tcm.r marked "(P.o.c) " wtn oald outsld" th, CIOlinll: thCII arc Ihown hut for informational DUrtJOIG and an no/Included In the Totau.

C:

D.

_.

NAMBOFBORRO~

PendoDe M GDleiolo

E. NAME AND ADDRESS OF SELLER:


F. NAME AND ADDRESS OF LENDER:

r-INAL

Uberty Revtne Mortpp, 11Ic,


10951 WbII1 Rock Road. SuIte 100
Ranello CordO\l1l CA 95670

G. PROPERTY LOCATION:
8091 SW 115111 Loop
OClla FL 34481

H. SETILEMENT AGENT:
FINANCIAL TITLE

I. SETILEMENT DA"fE:
OO.'nl Date:
Disbunement Date:

PLACE OF SElTLEMENT:
81 BLUE RAVINE ROAD (mO
FOLSOM, CA 95630

JUIlO 85, 1008

JUllolO,ZOIl

1. SUMMARY OF BORROWER'S TRANSACTION


100.
101.
101.
10J.
104.
lOS.
106.
107.
108.
109.

GROSS AMOUNT DUE FROM BORROWER:


Contracl salenrice
POrlonl1 DrOIlortv
Soulemenl charRes 10 bonower (line 14001
PIVOtT 10:
SURTNll
Payoff to:
Sun T!uII
Plyoff 10:
Oi$bunemenl 10:
Di,bunemcnl 10:
Oi,bunemenl 10;
AdhRtmenl,lo, I""" Hid bY HlI'" /Jl ""-<0

110. County

10;

II J. Alsemnonll

10:

111. 0000111
no. GROSS AMOUNT DUE FROM BORROWER
200. AMOUNTS PAID BY OR IN BEHALF OF BORROWER:
20 I. Doposil or camell money
Princioalamounl of new loaNll
Exisllna loaa{,l taken ,ubiecllo
Closina Coall
Cull Portion of lnillal Imw
PIVOtT 10:
SuoTlUIt
Plyoff 10:
Sua TIUIl
Plvoff 10:
Disbursement 10:
Disbullemenllo:
II. Oisbul'letnellllo:

202.
203.
04.
205.
06.
07.
08.
09.
10.

K. SUMMARY 01' SELLER'S TRANSACTION


400. GROSS AMOUNT DUB TO SELLER:

9179.~
0\6 n9.4

30323.6:'

401. COIIlracUal.. Drioo


402. J'enonal DrODllI1V
03.
404.

140,.
1406.
1407.
1408.

U . , _ ftw ~ ""Id Itwsfllu In ""-<0


1409. City/town tall..
to
10
'110. County
10
41l.AAeImerI"
411.
86.131.S3 420. CROSS AMOUNT DUE TO SELLER
500. REDUCTIONS IN AMOUNT DUE TO SELLERI

_a

01. Ell.... dwoalICsee iDltruc:tlonsl


502. Settlement char2ea to seller OiDc 14001
9.179.~ 1so3. Ellilliu loami) taken Nb'ect 10
10011
9420.9 ~. Pawffof Om
46n9.4 ~. I'aYOffoflCCOnd _ l o a t l
30313.6 ~06.

isO'.
~08.
~09.

510.
AtlJ_" ftw 1_ ""Id lw,fl14, III ""-'e.

Adiul/lMJlU Of' IttlltllXlld bY uJ", In ""-c.

12.
213.
214.
15.
216.
217.
218.
19.
220.
300,

City/County Tax.. to
County
to
A..~menll
10
0.0(

Rofund oC 0.00111:
Cash duo forP,volll's):
Cash due ror C101ina Co,I(,):

512. Cllv/towlllaJl"
13. Coantv
514. ....ICIImCIII..
IS.
16.

to

11.
0.00
~.46

18.
19.
~.

TOTAL REDUCTION AMOUNT DUE SELLER


CASH AT SETrL&MENT TO / FROM SELLER
86.232.'3 601. Orou amouat cIae 10 seller /IIao 420\
9',6'3.46 601. tAu roduedon ill amo"," duo seller nino '20
302. LeIIlmOWlllnaid bY / (or lIortower 0i1l0 nol
9.410.9 603. CASH (
) mOM C
) TO BORROWER
03. CASH ( ) FROM (X 1TO BORROWER
I have carefully _rewed lbo KUD-l klllelnOlll Slltemcnllrl410 til, boat ofm1 knowledp IlICI belief. It III tnIe Irl4 --.1lI_lofall .....iplI mel dlsbunelneall
mode on "'1lccount or bl' moln lbillllJlRC\ion, I runller cerIi~ lIIall ha.. received I Wf11 of1llo KtJO. I Stllklnenl S _ I <PI I and 2)
TOTAL PAID BY / FOR BORROWER
CASH AT SETTLEMENT FRowro BORROWER:
301. Q'OIII""",olclueflombo_lIine 120\

600.

jJ~m!~

BOlTOwe, P;.iOPtMAJiJ(aplO,l

~~

Date

BOrTOwcr

'WARNINO: lila 10dlll0 ro IcaowIDatYlIIIb r.JM _ _ \0 lhoUlIllId Sea... 00 thiI orfIIY &inrilarlbrm. P-nia upon COIIYlclillll can iaclude I
'lmprlr.. mcnL for della....: TW. \I U,S. Code S..lioo 1001 IIId Stetloa 1010.

n.. lnd

22

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

SETTLEMENT STATEMENT

700. TOTAL SALESIBROKER'S COMMISSION:


based on orice
S
Divi.ion of CommiSlion Oine 700) 81 fonOWl:
. 701.
S
702.
S
703. Commission paid at SeUlemcnt

Paolor2

FHA CuD No. : 091-440574)1952255

L. SETTLEMENT CHARGES

PAID PROM
BORROWER'S
FUNDS AT

to

SB'rI'L6MENT

to

PAm fROM

SELLER'S
PUNDSAT
SJm'L!MENT

704.
800.
801.
803.
804.
80.5.
806.
807.
808.
809.

ITEMS PAYABLE IN CONNECfiON W1TH LOAN


Loan Oriaination Fee
to
APDriisal Fee
to
Credit Report
to
Lender's Insuection Feo
co

Park AVeDUO BIDIe


Mee.tip Ii Morales AwraiJals
Park Avenue BlnkIKroll

2,640.00
250.00
10.%4
0.00

Tax Service Feo


to
Repair Administration Poe
to
Flood Certificate Fee
to Park Ave BankIKroll
810. Compliance Certificate
to
8 I I. Broker Fec
to (POe: S 3'8.70 Parle AvonUi Bank)
812. Corresuondent Fee
to (poe: S 250.00 Park Avenue Bank)
8) 3. Peo to Scrvicinl Company
to
CPOe: $ 395.00 LRMl
900. ITEMS REQUIRED BY LENDER TO BE PAID IN ADVANCE
901. rnterest From
to
@ Slday
902. Mortpgc Insurance Premium for
to
903. Hazard Insurance Premium for
yean to
(POC: S698.00 Marlcet Plaee)
904. Field904Labcl
tQ
90S.
to
1000. RESERVES DEPOSITED WITH LENDER
1001. Hazard lnau~
mODthl@S
montbJ@S
1002. M0rtello Insurance
1003. City Property Taxe$
montb,@S
1004. County Property tax~
monthl@S
laos. AnnulI Assessments
monthl@S
IJOO.
110 J.
1102.
1I03.
1104.
11 OS.
1106.
J 107.

) 113.
J%00.
)20 1.
1202.
1203.
1204.
120S.
1300.

J301.
1302.
1303.
1304.
130S.

0.00

2,640.00
0.00
0.00
0.00

TITLE CHARGES

SeUlemenl or closing Cee


Abstract or title search
Title examination
TitJo Insuranco Binder
Documena Preparation
Notary feel
Attorney's fees

II 08. Title inlurance

J J09.
)110.
1111.
1112.

0.00
0.00
12.00
0.00

to
to

Financial Titlo Company


PilUUlcial Title ComD8llY

484.00
J7'.00
0.00
0.00
100.00
48S.00
0.00

to

to
to
to

BayDoCI

Richard KwlatkowalJc

to
)
(lncilides Qbove i/.., ""..bm:
Financial Tide ComPany
to
(rnclwkl 4160.. It"", numlMn:)

735.00

S 132.000.00

Lender's coverage
Owner's coverage
TitlC' Endorsements
ALTA 9

to
to

Financial Title ComPlnY


Financial TiU, ComPIDY

100.00
73.50

to

GOVERNMENT RECORDING AND TRANSFER CHARGES


Recordim~ fees: Deed'
MortPlc 295.00'
lleJoaes
City/county taxl'tamps Ooed'
Morton J 089.70
Stato tax/slamps
MOnDIe
Deed'
Doc Prep
to Financial Title ComlJlDY
to
ADDITIONAL SETfLEMENT CHARGES
Survey
to
Pest Inspection
to
Financial Titlo Company
Courier Chime
to
to

295.00
1089.10
0.00
'0.00
0.00
0.00
40.00

10

S9,179.44

1400. TOTAL SElTLEMENT CHARGES (ar., on (Ina 103 &etlan J QtIl/ S01 SfIC#O" J()
I have prepared the HUD-) SetdelJlentStatemeot

Liberty ReveRe Mortgage, Inc.

Company
To'the ba~ orm)' knowledge, Ib' RUDI SettlJltR~iC4IClJIClDwYh
be di,burled, by ~he onderslpoclll J*1 or ,
By: --+-~-f-1~--.-t++-

By:

-;

~.-ftrlJJajmt~~A ~".o I

ICCUI'ato account oltbe

fundi whidl ~s jpllfcjttlCl.

......-,,~~~~~~ ......._ - - -

Date

WARNINO: It il crime to knowiaaJy make falsCllea


to tho Unitecl Statu oa thil or aDy .imllar fbrm. PenaJtia upon convlctioa CIa i
'imprisonment. for dcllill.cc: TlUc 18 U.S. Code Scctioa JOOI and ScctJuu 1010.

(t7/)

~_

Repraentatlve

/d.

'.20(2

orwiIJ

ADDENDUM TO BUD-I SElTLEMENT STATEMENT


CERTIFICATION OF BORROWER IN AN FHA-INSURED HECM
(HOME EQUITY CONVERSION MORTGAGB) LOAN TRANSACTION
I have carefully reviewed the HUD-l Settlement Statement, and to the best of my
knowledge and belief; it is a true and accurate statement of all receipts and disbmsoments made on
my account or by me in this transaction. I further certify that I have received a copy of the HtJD.l
Settlement Statement

Iz - t-a?'

Date

CERTIFICATION OF SEITLEMENT AGENT IN AN FHA..INSURED HECM


(HOME EQUITY CONVERSION MORTGAGE) LOAN TRANSACTION
To the best of my knowledg~ the HUD-I Settlement Statement which I have prepared is a
true and accurate account of the funds which were received, and have been or will be disbursed, by
the undersigned as part of the settlement of this transaction.

(The certifications contained herein may be obtained from the respective parties at different times or

may be contained on separate addenda.)


WARNING: It is a crime to knowingly make false statements to the United States on this or any
other similar form. Penalties upon conviction can include a fine and imprisonment. For details see
Title 18 U.S. Code Section 1001 and Section 101

Page 1 of 1

Neil Gillese!!"----From:

To:

Sent:
Subject:

"LIZ BAIZE" <LIZB@parkavebank.com>

<neilgillespie@mfi.net>

Tuesday, June 10, 2008 4:49 PM

update

Neil, there may be a day or two delay in funding your loan. I just notified your attorney that a
small revision needed to be done because A) with all that signing, a signature line for your mom
was missed AND the interest rate for the week before, although a slight difference, was picked up
in closing package and identified prior to being sent to HUD.
Richard (at OlIT expense) has agreed to go to your attorneys office to meet you there to sign the
corrections; and Mr. Stermer said that was fine with him. I am trying to confIrm with Liberty that
they will cover any cost incurred if a notary needs to go back out to Mark.
The difference in rate over the life of the loan is less than 1/8th percent. As soon as I know more I
will be in touch.
Sincerely,
Liz Baize

PAB

We at Park Avenue Bank care about your privacy and security.


Since email is not a secure form of communication, please do not send any
confidential information using email.

23
6/10/2008

HOME EQUITY CONVERSION MORTGAGE

NOTICE OF RIGHT TO CANCEL

FHA Case Number: 091-44057411951-255


Loan Number: 39100

Date Notice Given: JUDe 05, Z008

Borrower: Penelope M Gillespie

1. YOUR RIGHT TO CANCEL


We have agreed to establish an open-end credit account for you, and you have agreed to give us a mortgage on your
home as security for the account. You have a legal right under federa1law to cancel the account, without cost, within
three business days after the latest of the following events:
(I) the opeIIiug date of your account which is Jane 05, Z098: or

(2) the date you rec:oived your Truth-in.Lending disclosurea; or


(3) the date you received this notice of your right to cancel the account.

If you cancel the account, the mortgage 00 your home is also cancelled. Within 20 days of receiving your notice, we
must take the oecessary steps to reflect the fact that the mortgage on your home haS been cancelled. We must return
to you any money or property you have given us or to anyone elso in CODIIcction with the ac:c:ount.
You may keep any money or property we have given you until we have done the things mentioned above, but you
must then otter to return the money or property. If it is impractical or unfair for you to return the property, you must
otter its reasonable value. You may offer to returD tho property at your homo or at tho location of the property.
Money must be returned to the address shown below. Ifwe do not take posIC8lIion ofthe money or property within 20
calendar days of your offer, you may keep it without further obligation.
Z. HOW TO CANCEL
If you decide to cancel the account, you may do so by notifying us, in writing, at
Liberty Revene;Mortcaee, Inc.
10951 Wblte Rock Road, Suite 290
Rancho Cordova, CA 95670

You may usc any written statement that is signed and dated by you and states your intention to cancel, or you may usc
this notice by dating and signing below. Keep one copy of this notice no matter how you notify us because it contains
important information about your rights.
If you cancel by roW or telegram, you must send the notice DO later than midnight of June 09, 2008 (or midnight of
the third business day following the latm of the three events 1isted above). If you send or deliver your written notice
to cancel some other way, it must be delivered to the above address DO later than that time.
3. We also request that you immediately contact our Revem Funding Department toll-free at 866-341-0183 to inform
us that you have cancelled this transaction and have sent us the written confirmation as des~ribed in paragraph 2 above

I WISH TO CANCEL
Borrower'. Siguaturo

Dale

Borrowet's Signsture

Dale

ACKNOWLEDGEMENT OF RECEIPT
I hereby acknowledge receipt of two completed copies of the Home Equity Conversion Mortgage Notice of
Right to Cancel and a copy oCthe Home Equity Conversion Mortgage Federal Troth-in-Lending Disclosure
Statement

J2~ n ~

PeiJeJ;p;M:GU(ujde 5(.j.a~ft.u"

i-tJ,s---tJ;P;

24

Fax
From: Neil J. Gillespie
8092 SW 115th Loop
Ocala, FL 34481
Telephone: (352) 854-7807
To: Reverse Mortgage Solutions (RMS) Foreclosure Department
Fax: 1-866-790-3451
Date: June 19, 2012
Pages: two (2) including this page
Re: DISPUTE: loan 68011002615899 - Notice of Default - Intent to Foreclose
Please be advised that loan no. 68011002615899 is not in default, and I/we hereby dispute the
delinquency. The records of RMS are not accurate, there are three borrowers, and I am living in the
home. An Assignment of Mortgage provided by RMS in response to my RESPA request clearly
shows me as one of three original borrowers. A copy of the assignment accompanies this fax.
RMS did not provide a copy of the note in response to my RESPA request dated May 14, 2012
showing that the loan was legally transferred from Bank of America to RMS. This copy is needed to
show proof that RMS has a legal claim to the transferred mortgage by demonstrating a proper chain of
custody of the promissory note. The Assignment of Mortgage provided by RMS is not legally
sufficient in Florida to show a chain of custody.
Please be advised that I/we will defend any foreclosure action by RMS.
If RMS has a cash for keys program please advise. Thank you.

NOTE: This fax and the accompanying information is privileged and confidential and is intended only for use by the above
addressee. If you are not the intended recipient, you are hereby notified that any use, dissemination or copying of this fax
and the accompanying communications is strictly prohibited. If you have received this communication in error, please
immediately notify the sender by telephone, collect if necessary, and return the original message to me at the above address
via U.S. mail. Thank you for your cooperation.

25

Recording Requested By:

Bank of America

Prepared By: Diana De Avila

888-603-9011

When recorded mail to:

Reverse Mortgage Solutions, Inc.

2727 Spring Creek Drive

Spring, TX 77373

111111111111~1111I11111111111111

DocID#
1266801100261589920032
Property Address:
8092 SW 115TH LOOP
OCALA, FL 34481
This space for Recorder's use

3/2712012

FLO-AM 18001254

ASSIGNMENT OF MORTGAGE
For Value Received, the undersigned holder of a Mortgage (herein "Assignor") whose address is 190 QUEEN ANNE,
NORTH SUITE 100 SEATTLE, WA 98109 does hereby grant, sell, assign, transfer and convey unto REVERSE
MORTGAGE SOLUTIONS, INC., whose address is 2727 SPRING CREEK DRIVE, SPRING, TX 77373 all
beneficial interest under that certain Mortgage described below together with the note(s) and obligations therein
described and the money due and to become due thereon with interest and all rights accrued or to accrue under said
Mortgage,
LIBERTY REVERSE MORTGAGE, INC.
PENELOPE M. GILLESPIE, INDIVIDUALLY AND AS TRUSTEE NEIL J.
GILLESPIE AND MARK GILLESPIE, AS CO-TRUSTEES OF THE GILLESPIE
FAMILY LIVING TRUST AGREEMENT DATED FEBRUARY 10, 1997
Date of Mortgage:
6/5/2008
Original Loan Amount:
$198,000.00
Recorded in Marion County, FL on: 6/25/2008, book OR 05057, page 1670 and instrument number 2008065289
Original Lender:
Original Borrower(s):

IN WITN~~S Yo!tQ::REOF, the undersigned has caused this Assignment of Mortgage to be executed on

MAR Z'/ ZOlZ

L2:0G

By

Dominique JobnsoD

Assistant Vice President

C_hest
__B_1L_9_'V_i"_g_S__

Witness:

Witness:

Edward Gallegos

State of California
County of Ventura

2012

On MAR 27
before me,
J jJ)jan JEllison
, No4U"Y Public, personally
Jane Martorana
and
O6mlnlqUe Johnson ,who proved
appeared
to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that helshelthey executed the same in hislher/their authorized capacity(ies),
and that by hislher/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person
(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.

Notary Pu c:
Lillian J. Ellison
My Commission Expires: Ma!ch 13, 2015

LILLIAN J. ELLISON
C(lIMIIllion It 11256\7
. ~ Public -Cllltornit
los Angele. County.
..
M Comm. Ex 'res Mar 13. 2015

georgia.gov - 2011 Releases

1 of 2

http://dbf.georgia.gov/00/press_print/0,2669,43414745_166508814_170...

FOR IMMEDIATE RELEASE Friday, April 29, 2011

Georgia Department of Banking and Finance Takes


Possession of The Park Avenue Bank, Valdosta, Georgia
Atlanta, Georgia - The Georgia Department of Banking and Finance (Department) took possession
of The Park Avenue Bank, Valdosta, Georgia on April 29, 2011. The Superior Court of Lowndes
County issued an Order appointing the Federal Deposit Insurance Corporation (FDIC) as Receiver of
the Bank effective upon the Department taking possession of The Park Avenue Bank.
The Department took possession of The Park Avenue Bank pursuant to the Official Code of Georgia,
Section 7-1-150(a) which authorizes the Department in its discretion to take possession of the
business and property of any state chartered financial institution whenever such financial institution is
either insolvent or operating in an unsafe or unsound condition to transact its business, is operating in
violation of any court order, statute, rule or regulation, or requests the Department to take
possession of its business and property.
Through an agreement with the FDIC, The Park Avenue Bank will be acquired by Bank of the Ozarks,
Little Rock, Arkansas.
All deposit accounts of The Park Avenue Bank have been transferred to Bank of the Ozarks and will be
available immediately. Depositors will be able to access their accounts at the former main office and
branch locations of The Park Avenue Bank during regular business hours. Customers of both banks
should continue to use their existing branches until Bank of the Ozarks can fully integrate the deposit
records of The Park Avenue Bank. Additionally, the former depositors of The Park Avenue Bank can
continue to access their accounts through automated teller machine transactions, checks and debit
transactions.
All deposits will be transferred to Bank of the Ozarks and, therefore, it is not anticipated that there
will be any loss exposure to former The Park Avenue Bank depositors that have deposits exceeding
the FDIC Deposit Insurance amounts.
The Departments Commissioner, Robert M. Braswell, reminds depositors that deposits of all Georgia
banks are insured by the FDIC up to $250,000. Special rules are in place for accounts held in trust
status and joint accounts that may further expand deposit insurance coverage. Additional information
on FDIC Deposit Insurance may be found at www.fdic.gov.
The FDIC has established a website and a toll-free phone number to answer questions from
depositors, creditors and other interested parties regarding the receivership of The Park Avenue
Bank. Please refer to the FDICs website for further information regarding the details of the purchase
and assumption transaction. The website is http://www.fdic.gov/bank/individual/failed

26

7/3/2012 9:45 AM

georgia.gov - 2011 Releases

2 of 2

http://dbf.georgia.gov/00/press_print/0,2669,43414745_166508814_170...

/parkavenue_ga.html and the toll-free phone number is 1-800-894-5183. The phone number is
operational this evening until 9 p.m. Eastern Standard Time, on Saturday from 9 a.m. until 6 p.m. on
Sunday from noon to 6 p.m. and thereafter from 8 a.m. to 8 p.m.

7/3/2012 9:45 AM

FDIC: Press Releases - PR-79-2011 4/29/2011

1 of 2

http://www.fdic.gov/news/news/press/2011/pr11079.html

Press Releases
Bank of the Ozarks, Little Rock, Arkansas, Acquires All the
Deposits of Two Georgia Banks
First Choice Community Bank, Dallas and The Park Avenue Bank, Valdosta

FOR IMMEDIATE RELEASE


April 29, 2011

Media Contact:
LaJuan Williams-Young
(202) 898-3876
Email: Lwilliams-young@fdic.gov

Bank of the Ozarks, Little Rock, Arkansas, acquired the banking operations, including
all the deposits, of two Georgia-based banks. To protect depositors, the Federal
Deposit Insurance Corporation (FDIC) entered into purchase and assumption
agreements with Bank of the Ozarks.
First Choice Community Bank, Dallas, Georgia, and The Park Avenue Bank,
Valdosta, Georgia, were closed today by the Georgia Department of Banking and
Finance, which appointed the FDIC as receiver.
All 19 branches of the two closed banks will reopen during their normal business
hours beginning Saturday as branches of Bank of the Ozarks. Depositors of the two
failed banks will automatically become depositors of Bank of the Ozarks. Deposits
will continue to be insured by the FDIC, so there is no need for customers to change
their banking relationship in order to retain their deposit insurance coverage up to
applicable limits. First Choice Community Bank had seven branches in Georgia; and
The Park Avenue Bank had eleven branches in Georgia and one branch in Florida.
Customers of the two failed banks should continue to use their former branches until
they receive notice from Bank of the Ozarks that it has completed systems changes
to allow other branches of Bank of the Ozarks to process their accounts as well.
Over the weekend, depositors can access their money by writing checks or using
ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan
customers should continue to make their payments as usual.
As of December 31, 2010, First Choice Community Bank had total assets of $308.5
million and total deposits of $310.0 million; and The Park Avenue Bank had total
assets of $953.3 million and total deposits of $827.7 million. Besides assuming all the
deposits from the two Georgia banks, Bank of the Ozarks will purchase essentially all
of their assets.
The FDIC and Bank of the Ozarks entered into loss-share transactions on the failed
banks' assets. The loss-share transaction for First Choice Community Bank was
$260.7 million; and the loss-share transaction for The Park Avenue Bank was $514.1
million. Bank of the Ozarks will share in the losses on the asset pools covered under
the loss-share agreements. The loss-share transactions are projected to maximize
returns on the assets covered by keeping them in the private sector. The transactions
also are expected to minimize disruptions for loan customers. For more information
on loss share, please visit: http://www.fdic.gov/bank/individual/failed/lossshare
/index.html.
Customers who have questions about today's transactions can call the FDIC toll free:
for First Choice Community Bank customers, 1-800-894-7035; and for The Park
Avenue Bank customers, 1-800-894-5183. The phone numbers will be operational this
evening until 9:00 p.m. Eastern Daylight Time (EDT); on Saturday from 9:00 a.m. to
6:00 p.m. EDT; on Sunday from noon until 6:00 p.m. EDT; and thereafter from 8:00
a.m. to 8:00 p.m. EDT.

27

7/3/2012 9:41 AM

FDIC: Press Releases - PR-79-2011 4/29/2011

2 of 2

http://www.fdic.gov/news/news/press/2011/pr11079.html

Interested parties also can visit the FDIC's Web sites: for First Choice Community
Bank, http://www.fdic.gov/bank/individual/failed/firstchoice.html; and for The Park
Avenue Bank, http://www.fdic.gov/bank/individual/failed/parkavenue_ga.html.
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) for First
Choice Community Bank will be $92.4 million; and for The Park Avenue Bank, $306.1
million. Bank of the Ozarks' acquisition of all the deposits of the two institutions was
the "least costly" option for the DIF compared to all alternatives.
The closings are the 37th and 38th FDIC-insured institutions to fail in the nation so far
this year and the ninth and tenth in Georgia. Prior to today, the last bank closed in the
state was New Horizons Bank, East Ellijay, on April 15, 2011.
###
Congress created the Federal Deposit Insurance Corporation in 1933 to restore
public confidence in the nation's banking system. The FDIC insures deposits at the
nation's 7,657 banks and savings associations and it promotes the safety and
soundness of these institutions by identifying, monitoring and addressing risks to
which they are exposed. The FDIC receives no federal tax dollars insured financial
institutions fund its operations.
FDIC press releases and other information are available on the Internet at
www.fdic.gov, by subscription electronically (go to www.fdic.gov/about/subscriptions
/index.html) and may also be obtained through the FDIC's Public Information Center
(877-275-3342 or 703-562-2200). PR-79-2011

7/3/2012 9:41 AM

UNITED STATES OF AMERICA


BEFORE THE
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, DC.
STATE OF GEORGIA
DEPARTMENT OF BANKING AND FINANCE
ATLANTA, GEORGIA

Written Agreement by and among


PAB BANKSHARES, INC.
Valdosta, Georgia

Docket Nos. 09-084-WA/RB-HC


09-084-WA/RB-SM

THE PARK AVENUE BANK


Valdosta, Georgia
FEDERAL RESERVE BANK OF ATLANTA
Atlanta, Georgia
and
BANKING COMMISSIONER OF
THE STATE OF GEORGIA
Atlanta, Georgia

WHEREAS, in recognition of their common goal to maintain the financial soundness of


PAB Bankshares, Inc., Valdosta, Georgia ("Bankshares"), a registered bank holding company,
and its subsidiary bank, The Park Avenue Bank, Valdosta, Georgia (the "Bank"), a state
chartered bank that is a member of the Federal Reserve System, Bankshares, the Bank, the
Federal Reserve Bank of Atlanta (the "Reserve Bank"), and the Banking Commissioner of the
State of Georgia (the "Commissioner") have mutually agreed to enter into this Written
Agreement (the "Agreement"); and

28

WHEREAS, on July 9, 2009, Bankshares's and the Bank's boards of directors,


at duly constituted meetings, adopted resolutions authorizing and directing Donald J. Torbert, Jr.,
president and chief executive officer to consent to this Agreement on behalf of Bankshares and
the Bank and consenting to compliance with each and every applicable provision of this
Agreement by Bankshares, the Bank, and their institution-affiliated parties, as defined in
sections 3(u) and 8(b)(3) of the Federal Deposit Insurance Act, as amended (the "FDI Act")
(12U.S.C. 1813(u)and 1818(b)(3)).
NOW, THEREFORE, Bankshares, the Bank, the Reserve Bank, and the Commissioner
agree as follows:
Credit Risk Management
1.

Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and

the Commissioner an acceptable written plan to strengthen credit risk management practices.
The plan shall, at a minimum, address, consider, and include:
(a)

Procedures to periodically review and revise risk exposure limits to

address changes in market conditions;


(b)

strategies to minimize credit losses;

(c)

procedures to identify, limit, and manage concentrations of credit that are

consistent with the Interagency Guidance on Concentrations in Commercial Real Estate Lending,
Sound Risk Management Practices, dated December 12, 2006 (SR 07-1), including but not
limited to: establishment of concentration of credit risk tolerances or limits by types of loan
products, geographic locations, and other common risk characteristics or sensitivities; enhanced
stress testing; and enhanced periodic reporting to management and the board of directors; and

(d)

measures to address the criticisms regarding credit risk management noted

in the report of the examination of the Bank that was conducted jointly by the Reserve Bank and
Commissioner that commenced on January 26, 2009 (the "Report of Examination").
Lending and Credit Administration
2.

Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and

the Commissioner an acceptable written lending and credit administration program that shall, at a
minimum, address, consider, and include:
(a)

Underwriting standards that require documented analyses of any borrower's

and guarantor's repayment sources, global cash flow, and overall debt service ability;
(b)

procedures for the periodic analyses of any current borrower's and

guarantor's repayment sources, global cash flow, and overall debt service ability;
(c)

an enhanced internal loan review process that includes, but is not limited to,

increased frequency of loan reviews;


(d)

the appropriate use of interest reserves;

(e)

limitations on the capitalization of interest; and

(f)

improved documentation of loan modifications.

Asset Improvement
3.

(a)

The Bank shall not, directly or indirectly, extend or renew any credit to or

for the benefit of any borrower, including any related interest of the borrower, who is obligated
to the Bank in any manner on any extension of credit or portion thereof that has been charged off
by the Bank or classified, in whole or in part, "loss" in the Report of Examination or in any
subsequent report of examination, as long as such credit remains uncollected.

(b)

The Bank shall not, directly or indirectly, extend or renew any credit to or

for the benefit of any borrower, including any related interest of the borrower, whose extension
of credit has been classified "doubtful" or "substandard" in the Report of Examination or in any
subsequent report of examination, without the prior approval of the Bank's board of directors.
The board of directors shall document in writing the reasons for the extension of credit or
renewal, specifically certifying that: (i) the extension of credit is necessary to protect the Bank's
interest in the ultimate collection of the credit already granted or (ii) the extension of credit is in
full compliance with the Bank's written loan policy, is adequately secured, and a thorough credit
analysis has been performed indicating that the extension or renewal is reasonable and justified,
all necessary loan documentation has been properly and accurately prepared and filed, the
extension of credit will not impair the Bank's interest in obtaining repayment of the already
outstanding credit, and the board of directors reasonably believes that the extension of credit or
renewal will be repaid according to its terms. The written certification shall be made a part of
the minutes of the board of directors meetings, and a copy of the signed certification, together
with the credit analysis and related information that was used in the determination, shall be
retained by the Bank in the borrower's credit file for subsequent supervisory review. For
purposes of this Agreement, the term "related interest" is defined as set forth in section 215.2(n)
of Regulation O of the Board of Governors of the Federal Reserve System (the "Board of
Governors") (12 C.F.R. 215.2(n)).
4.

(a)

Within 60 days of this Agreement, the Bank shall submit to the Reserve

Bank and the Commissioner an acceptable written plan designed to improve the Bank's position
through repayment, amortization, liquidation, additional collateral, or other means on each loan
or other asset in excess of $500,000, including OREO, that: (i) is past due as to principal or

interest more than 90 days as of the date of this Agreement; (ii) is on the Bank's problem loan
list; or (iii) was adversely classified in the Report of Examination. In developing the plan for
each loan, the Bank shall, at a minimum, review, analyze, and document the financial position of
the borrower, including source of repayment, repayment ability, and alternative repayment
sources, as well as the value and accessibility of any pledged or assigned collateral, and any
possible actions to improve the Bank's collateral position.
(b)

Within 30 days of the date that any additional loan or other asset in excess

of $500,000, including OREO: (i) becomes past due as to principal or interest for more than
90 days; (ii) is on the Bank's problem loan list; or (iii) is adversely classified in any subsequent
report of examination of the Bank, the Bank shall submit to the Reserve Bank and the
Commissioner an acceptable written plan to improve the Bank's position on such loan or asset.
(c)

Within 30 days after the end of each calendar quarter thereafter, the Bank

shall submit a written progress report to the Reserve Bank and the Commissioner to update each
asset improvement plan, which shall include, at a minimum, the carrying value of the loan or
other asset and changes in the nature and value of supporting collateral, along with a copy of the
Bank's current problem loan list, extension report, and past due/non-accrual report. The board of
directors shall review the progress reports before submission to the Reserve Bank and shall
document the review in the minutes of the board of directors' meetings.
Allowance for Loan and Lease Losses
5.

(a)

Within 10 days of this Agreement, the Bank shall eliminate from its

books, by charge-off or collection, all assets or portions of assets classified "loss" in the Report
of Examination that have not been previously collected in full or charged off. Thereafter the
Bank shall, within 30 days from the receipt of any federal or state report of examination, charge

off all assets classified "loss" unless otherwise approved in writing by the Reserve Bank and the
Commissioner.
(b)

The Bank shall maintain a sound process for determining, documenting,

and recording an adequate allowance for loan and lease losses ("ALLL") in accordance with
regulatory reporting instructions and relevant supervisory guidance, including the Interagency
Policy Statements on the Allowance for Loan and Lease Losses, dated July 2, 2001 (SR 01-17
(Sup)) and December 13, 2006 (SR 06-17).
(c)

Within 60 days of this Agreement, the Bank shall submit to the Reserve

Bank and the Commissioner an acceptable written program for the maintenance of an adequate
ALLL. The program shall include policies and procedures to ensure adherence to the ALLL
methodology and provide for periodic reviews and updates to the ALLL methodology, as
appropriate. The program shall also provide for a review of the ALLL by the board of directors
on at least a quarterly calendar basis. Any deficiency found in the ALLL shall be remedied in the
quarter it is discovered, prior to the filing of the Consolidated Reports of Condition and Income,
by additional provisions. The board of directors shall maintain written documentation of its
review, including the factors considered and conclusions reached by the Bank in determining the
adequacy of the ALLL. During the term of this Agreement, the Bank shall submit to the Reserve
Bank and the Commissioner within 30 days after the end of each calendar quarter, a written report
regarding the board of directors' quarterly review of the ALLL and a description of any changes
to the methodology used in determining the amount of ALLL for that quarter.
Capital Plan
6.

Within 60 days of this Agreement, Bankshares and the Bank shall jointly submit

to the Reserve Bank and the Commissioner an acceptable written plan to maintain sufficient

capital at Bankshares, on a consolidated basis, and the Bank as a separate legal entity on a
stand-alone basis. The plan shall, at a minimum, address, consider, and include:
(a)

Bankshares's current and future capital requirements, including

compliance with the Capital Adequacy Guidelines for Bank Holding Companies: Risk-Based
Measure and Tier 1 Leverage Measure, Appendices A and D of Regulation Y of the Board of
Governors (12 C.F.R. Part 225, App. A and D);
(b)

the Bank's current and future capital requirements, including compliance

with the Capital Adequacy Guidelines for State Member Banks: Risk-Based Measure and Tier 1
Leverage Measure, Appendices A and B of Regulation H of the Board of Governors (12 C.F.R.
Part 208, App. A and B);
(c)

the adequacy of the Bank's capital, taking into account the volume of

classified credits, concentrations of credit, ALLL, current and projected asset growth, and
projected retained earnings;
(d)

the source and timing of additional funds to fulfill Bankshares's and the

Bank's future capital requirements; and


(e)

the requirements of section 225.4(a) of Regulation Y of the Board of

Governors (12 C.F.R. 225.4(a)) that Bankshares serve as a source of strength to the Bank.
7.

Bankshares shall notify the Reserve Bank and the Commissioner, in writing, no

more than 30 days after the end of any quarter in which any of Bankshares's consolidated capital
ratios fall below the approved plan's minimum ratios. Bankshares and the Bank shall notify the
Reserve Bank and the Commissioner, in writing, no more than 30 days after the end of any
quarter in which any of the Bank's capital ratios (total risk-based, Tier 1 risk-based, or leverage)
fall below the approved plan's minimum ratios. Together with the notification, Bankshares and

the Bank, as appropriate, shall submit to the Reserve Bank and the Commissioner an acceptable
written plan that details the steps Bankshares and/or the Bank will take to increase the respective
capital ratios above the plan's minimums.
Earnings Plan and Budget
8.

(a)

Within 60 days of this Agreement, the Bank shall submit to the Reserve

Bank and the Commissioner a plan to improve the Bank's earnings, and a revised budget for the
remainder of 2009. The written plan and budget shall include, but not be limited to:
(i)

identification of the major areas where, and means by which, the

board of directors will seek to improve the Bank's operating performance;


(ii)

a realistic and comprehensive budget for the remainder of 2009,

including income statement and balance sheet projections; and


(iii)

a description of the operating assumptions that form the basis for,

and adequately support, major projected income, expense, and balance sheet components.
(b)

An earnings plan and budget for each calendar year subsequent to 2009

shall be submitted to the Reserve Bank and the Commissioner at least 30 days prior to the
beginning of that calendar year.
Liquidity/Funds Management
9.

Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and

the Commissioner an acceptable written plan designed to improve management of the Bank's
liquidity position and funds management practices. The plan shall, at a minimum, address,
consider, and include:
(a)

Measures to enhance the monitoring, measurement, and reporting of the

Bank's liquidity to the board of directors;

(b)

a timetable to reduce reliance on borrowing and short-term wholesale

funding, including brokered deposits; and


(c)

specific liquidity targets and parameters and the maintenance of sufficient

liquidity to meet contractual obligations and unanticipated demands.


10.

Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and

the Commissioner an acceptable revised written contingency funding plan that, at a minimum,
identifies available sources of liquidity and includes adverse scenario planning.
Dividends
11.

(a)

Bankshares and the Bank shall not declare or pay any dividends without

the prior written approval of the Reserve Bank and the Director of the Division of Banking
Supervision and Regulation of the Board of Governors (the "Director"), and the Commissioner.
(b)

Bankshares shall not take any other form of payment representing a

reduction in capital from the Bank without the prior written approval of the Reserve Bank and
the Commissioner.
(c)

Bankshares and its nonbank subsidiaries shall not make any distributions

of interest, principal, or other sums on subordinated debentures or trust preferred securities


without the prior written approval of the Reserve Bank, the Director, and the Commissioner.
(d)

All requests for prior approval shall be received at least 30 days prior to

the proposed dividend declaration date, proposed distribution on subordinated debentures, and
required notice of deferral on trust preferred securities. All requests shall contain, at a minimum,
current and projected information, as appropriate, on the parent's capital, earnings, and cash
flow; the Bank's capital, asset quality, earnings and ALLL needs; and identification of the
sources of funds for the proposed payment or distribution. For requests to declare or pay

dividends, Bankshares and the Bank, as appropriate, must also demonstrate that the requested
declaration or payment of dividends is consistent with the Board of Governors' Policy Statement
on the Payment of Cash Dividends by State Member Banks and Bank Holding Companies, dated
November 14, 1985 (Federal Reserve Regulatory Service, 4-877 at page 4-323).
Debt and Stock Redemption
12.

(a)

Bankshares shall not, directly or indirectly, incur, increase, or guarantee

any debt without the prior written approval of the Reserve Bank and the Commissioner. All
requests for prior written approval shall contain, but not be limited to, a statement regarding the
purpose of the debt, the terms of the debt, and the planned source(s) for debt repayment, and an
analysis of the cash flow resources available to meet such debt repayment.
(b)

Bankshares shall not, directly or indirectly, purchase or redeem any shares

of its stock without the prior written approval of the Reserve Bank and the Commissioner.
Compliance with Laws and Regulations
13.

(a)

The Bank shall immediately take all necessary steps to correct the

violations of section 7-1-285 of the Financial Institutions Code of Georgia cited in the Report of
Examination. In addition, the Bank shall take necessary steps to ensure future compliance with
all applicable laws and regulations.
(b)

In appointing any new director or senior executive officer, or changing the

responsibilities of any senior executive officer so that the officer would assume a different senior
executive officer position, Bankshares and the Bank shall comply with the notice provisions of
section 32 of the FDI Act (12 U.S.C. 1831i) and Subpart H of Regulation Y of the Board of
Governors (12 C.F.R. 225.71 et seq.).

(c)

Bankshares and the Bank shall comply with the restrictions on

indemnification and severance payments of section 18(k) of the FDI Act (12 U.S.C. 1828(k))
and Part 359 of the Federal Deposit Insurance Corporation's regulations (12 C.F.R. Part 359).
Compliance with the Agreement
14.

(a)

Within 10 days of this Agreement, the boards of directors of Bankshares

and the Bank shall appoint a joint committee (the "Compliance Committee") to monitor and
coordinate Bankshares's and the Bank's compliance with the provisions of this Agreement. The
Compliance Committee shall include a majority of outside directors who are not executive
officers or principal shareholders of Bankshares and the Bank, as defined in sections 215.2(e)(1)
and 215.2(m)(1) of Regulation O of the Board of Governors (12 C.F.R. 215.2(e)(1) and
215.2(m)(1)). At a minimum, the Compliance Committee shall meet at least monthly, keep
detailed minutes of each meeting, and report its findings to the boards of directors of Bankshares
and the Bank.
(b)

Within 30 days after the end of each calendar quarter following the date of

this Agreement, the Bank shall submit to the Reserve Bank and the Commissioner written
progress reports detailing the form and manner of all actions taken to secure compliance with
this Agreement and the results thereof.
Approval and Implementation of Plans and Programs
15.

(a)

The Bank and, as applicable, Bankshares shall submit written plans and

programs that are acceptable to the Reserve Bank and the Commissioner within the applicable
time periods set forth in paragraphs 1, 2, 4, 5(c), 6, 9, and 10 of this Agreement.
(b)

Within 10 days of approval by the Reserve Bank and the Commissioner,

the Bank and, as applicable, Bankshares shall adopt the approved plans and programs. Upon

adoption, the Bank and, as applicable, Bankshares shall promptly implement the approved plans
and programs, and thereafter fully comply with them.
(c)

During the term of this Agreement, the approved plans and programs shall

not be amended or rescinded without the prior written approval of the Reserve Bank and the
Commissioner.
Communications
16.

All communications regarding this Agreement shall be sent to:


(a)

Mr. Robert D. Hawkins


Assistant Vice President
Federal Reserve Bank of Atlanta
1000PeachtreeSt.,N.E.
Atlanta, Georgia 30309-4470

(b)

Mr. Robert M. Braswell


Commissioner
Department of Banking and Finance
2900 Brandywine Road
Suite 200
Atlanta, Georgia 30341

(c)

Mr. Donald J. Torbert, Jr.


President and Chief Executive Officer
PAB Bankshares, Inc.
The Park Avenue Bank
P.O. Box 3460
Valdosta, Georgia 31604-3460

Miscellaneous
17.

Notwithstanding any provision of this Agreement, the Reserve Bank and the

Commissioner may, in their sole discretion, grant written extensions of time to Bankshares and
the Bank to comply with any provision of this Agreement.
18.

The provisions of this Agreement shall be binding upon Bankshares, the Bank,

and their institution-affiliated parties, in their capacities as such, and their successors and assigns.

19.

Each provision of this Agreement shall remain effective and enforceable until

stayed, modified, terminated, or suspended in writing by the Reserve Bank and the
Commissioner.
20.

The provisions of this Agreement shall not bar, estop, or otherwise prevent the

Board of Governors, the Reserve Bank, the Commissioner, or any other federal or state agency
from taking any other action affecting Bankshares, the Bank, or any of their current or former
institution-affiliated parties and their successors and assigns.
21.

Pursuant to Section 50 of the FDI Act (12 U.S.C. 1831aa), this Agreement is

enforceable by the Board of Governors under Section 8 of the FDI Act (12 U.S.C. 1818).

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of


the 14th day of July, 2009.

PAB BANKSHARES, INC.

FEDERAL RESERVE BANK OF


ATLANTA

By: /s/ Donald J. Tolbert, Jr.


President and CEO

By: /s/ Robert D. Hawkins


Assistant Vice President

THE PARK AVENUE BANK

BANKING COMMISSIONER OF
THE STATE OF GEORGIA

By: /s/ Donald J. Tolbert, Jr.


President and CEO

By: /s/ George A. Reynolds


George A. Reynolds for
Robert M. Braswell
Commissioner

Financial Title Co. shuts down in California - Silicon Valley / San Jose B... http://www.bizjournals.com/sanjose/stories/2008/07/28/daily50.html?s=print

1 of 2

From the Silicon Valley / San Jose Business Journal


:http://www.bizjournals.com/sanjose/stories/2008/07/28/daily50.html

Silicon Valley / San Jose Business Journal by Sharon Simonson


Date: Wednesday, July 30, 2008, 11:23am PDT
Related:
Residential Real Estate
Financial Title Co. has shut its doors across the state as part of a closure of multiple offices and
title companies by its parent, Mercury Cos. of Colorado.
The decision by the largest real-estate title agent in Silicon Valley follows a move by Mercury's
lenders to pull their line of credit after Mercury failed to meet loan requirements, according to an
e-mail from Jim Hilbun, president of United Title of Texas. Unite Title is also owned by Mercury.
"Mercury is closing all of its companies outside of Colorado, which includes Arizona, California,
Oregon and Nevada," Hilbun told employees.
Examiners representing the California Department of Insurance, which regulates and polices titlepolicy underwriters and agents, were on hand at all 57 Financial Title offices in the state
Wednesday to ensure that escrow funds were properly handled and not stolen or lost, said Darrel
Ng, press secretary for the agency.
Financial Title did not close due any enforcement action by the state nor has First American
assumed responsibility for the pending escrows as a result of state pressure or requirement, he
said.
Workers were removing items before dawn on Wednesday from Financial Title's Pruneyard office
in Campbell. A sign posted on the door said the office was closing and referred inquiries to First
American, Financial's title policy underwriter, and to Mercury.
The Pruneyard office is one of 16 listed in Santa Clara County on Financial Title's Web site. It also
lists five in San Mateo County, five in San Francisco, four in Contra Costa County and 15 in
Sacramento County.
Neither Financial Title nor Mercury nor First American responded to calls for this story immediately.
Sources who have spoken to Financial Title employees said the title company began closing its
doors in Santa Clara County Tuesday night. Those sources said all employees have lost their jobs,
and Financial's underwriter, First American Title Co., has been collecting open escrow files at the
closed offices. They also say Financial Chief Executive Officer Ivy Anderson has resigned.
Anderson did not return a message left on her cell phone. Jim Cortese, county manager of

7/3/2012 1:03 PM

Financial Title Co. shuts down in California - Silicon Valley / San Jose B... http://www.bizjournals.com/sanjose/stories/2008/07/28/daily50.html?s=print

2 of 2

Financial's Santa Clara County operations, also has lost his job.
The abrupt move mirrors that of Financial's former sister company, Alliance Title Co., which also
closed with almost no notice late last year. Former employees and landlords of Alliance have filed
multiple lawsuits alleging they were not paid. Alliance declared Chapter 7 bankruptcy in Northern
California federal court June 5.
Mercury is owned by the Jerrold G. "Jerry" Hauptman family of Colorado. Financial Title is still
operating in Colorado.

7/3/2012 1:03 PM

Genworth lures Liberty Reverse Mortgage with $50 million - Sacramento...

1 of 2

http://www.bizjournals.com/sacramento/stories/2007/07/30/story11.html...

30

From the Sacramento Business Journal


:http://www.bizjournals.com/sacramento/stories/2007/07/30/story11.html

Reverse mortgages draw attention as need grows, other lending falters


Premium content from Sacramento Business Journal by Mark Anderson, Staff Writer
Date: Sunday, July 29, 2007, 9:00pm PDT
Liberty Reverse Mortgage Inc. was not for sale. But Genworth Financial Inc. badly wanted to add
the nation's fourth-largest originator of reverse mortgages to its stable of financial services.
Last week, its persistence paid off, as Genworth announced it would pay $50 million for the
four-year-old Rancho Cordova company. Liberty founders Scott Hanson and Pat McClain could
potentially earn more if performance goals are reached, Genworth spokesman Tom Topinka said.
Hanson and McClain, the principals of Hanson McClain Retirement Planning, will take advisory
committee positions with Genworth, Hanson said.
The Liberty acquisition, which closes at the end of the year, continues the trend of large,
independent reverse mortgage operations being bought out. IndyMac Bancorp Inc. in 2004 bought
Financial Freedom. In April, Bank of America bought Seattle Mortgage, which operates Reverse
Mortgage of America.
Wells Fargo, IndyMac Bancorp Inc. and Seattle Mortgage Co. are now the top reverse mortgage
companies, ahead of Liberty.
Genworth (NYSE: GNW), based in Richmond, Va., is an insurance holding company that sells
insurance, mortgage and retirement products and, starting next year, reverse mortgages.
McClain and Hanson launched Liberty in 2003 because they often saw a need for it in their
retirement planning practice. Some seniors on limited incomes whose largest asset is their home
cannot make ends meet. For such people, a home equity loan isn't a good product because it
comes with monthly payments. The home equity conversion mortgage -- the official name of a
reverse mortgage -- draws down on the home's value and includes an insurance policy that
guarantees the resident can never be pushed out.
"When Genworth first approached us, we weren't interested," Hanson said. "But as we looked at
it, it made a lot of sense. We can use their strength to increase cross marketing. They specialize in
the senior market. ... The more we looked at it, the more we realized the better it can fit. They
can grow it a lot faster than we can."
In addition to being a good financial deal for Hanson and McClain, the reverse mortgage business
makes a big difference in a lot of people's lives, Hanson said. There are seniors who might live in a

7/3/2012 1:14 PM

Genworth lures Liberty Reverse Mortgage with $50 million - Sacramento...

2 of 2

http://www.bizjournals.com/sacramento/stories/2007/07/30/story11.html...

nice house, which is a huge cache of stored equity, and yet they cannot afford to buy food, he
said.
"A lot of companies want to get into this business," said Rich Young, Sacramento branch manager
of California Reverse Mortgage. His company was bought last year by Atlanta-based Generation
Mortgage Co., now the 10th-largest reverse mortgage company in the country.
"There is a huge need for this product, and there is a lot of demand. The estimate is that there is
only 1 percent penetration in the market," Young said.
With the slowdown in regular mortgages and the fallout of subprime lending, some regular
mortgage professionals are trying to do reverse mortgages, Young said.
"They don't realize this is a completely different business," he said.
Reverse mortgages are a highly specialized product. Federal law mandates a two-hour counseling
session for the person who signs the loan papers.
"Unless someone specializes in reverse mortgages, they are not an easy product to sell," said Jeff
Tarbell, president of ATM Mortgage Corp. in Sacramento. "It costs so much to go through the
whole process, and they take a lot of time."
All 150 Liberty employees will be retained in the current office, Topinka said. Genworth has two
other subsidiaries with locations in California. Genworth was spun out of General Electric Co. in a
$2.8 billion public offering in 2004.
Hanson and McClain launched Liberty as a separate company. They never took on any debt to
build Liberty, growing it from cash flow.
Hanson McClain, meanwhile, has been expanding its own retirement planning offices across the
country. Locally, it has offices in Sacramento, Roseville, Folsom and Elk Grove. Over the past
couple of years, Hanson McClain has added offices in Dallas, Houston, San Antonio, Oak Brook, Ill.,
and Southfield, Mich.
Hanson McClain has grown to $1.2 billion in assets under management. A subsidiary, the Hanson
McClain Network, a marketing and transfer agent for independent retirement advisers, has more
than $3 billion in assets under management.
manderson@bizjournals.com | 916-558-7874

7/3/2012 1:14 PM

,..
DURABLE POWER OF ATTORNEY

I, PENELOPE M. GILLESPIE of8092 SW 115thLoop, Ocala, Florida 34481, appoint


NEIL J. GILLESPIE of8092 SW 115th Loop, Ocala, Florida 34481, my true and lawful attorney
in fact for me and in my name, place, and stead and for my use and benefit to manage my affairs
as set forth below. Upon the death, failure or inability of him to act as my attorney in fact, then
I appoint ELIZABETH A. BAUERLE of6356 SW 106th Place, Ocala, Florida 34476; to act as
my attorney in fact in his stead.
1.

Powers Granted: Except as otherwise limited by applicable law or by this durable

power ofattorney, my attorney in fact has full authority to perform, without prior court approval,
every act authorized and specifically enumerated below:
a.

To exercise, do, or perform any act, right, power, duty, or obligation

whatsoever that I now have or may acquire the legal right, power or capacity to exercise, do, or
perform in connection with, arising out of, or relating to any person, item, thing, transaction,
business property, real or personal, tangible or intangible, including homestead real property, and
whether held in joint tenancy with right of survivorship, tenancy in common or tenancy by the
entirety, and all property over which I hold a general, limited or special power of appointment,
and all contractual or statutory rights or elections, including but not limited to, any rights or
elections in any probate or similar proceedings to which I am or may become entitled; or any other
matter whatsoever;
b. To ask, demand, redeem, sue for, recover, collect, receive, and hold and possess
all such sums of money, debts, dues, bonds, notes, checks, drafts, accounts, deposits, legacies,
bequests, devises, interests, dividends, stock certificates, certificates ofdeposit, annuities, pension
1

31

and retirement benefits, insurance benefits and proceeds, documents oftitle, choses in action, per
sonal and real property, intangible and tangible property and property rights, and demands
whatsoever, liquidated or unliquidated, as are now, or shall hereafter become due, owing, payable,
owned, or belonging to me or in which I have or may acquire an interest, and to have, use, and
take all lawful ways and means and legal and equitable remedies, procedures, and writs in my name
for the collection and recovery thereof, and to compromise, settle, and agree for the same, and to
make, execute, and deliver for me and in my name all endorsements, acquittances, releases,
receipts, or other sufficient discharges for the same;
c. To lease, purchase, exchange and acquire, and to bargain, contract, and agree
for the lease, purchase, exchange and acquisition of, and to take, receive, and possess any real or
personal property whatsoever, intangible or tangible, or interest therein, on such terms and
conditions, and under such covenants as my attorney in fact shall deem proper;
d. To improve, repair, maintain, manage, insure, rent, lease, sell, release, convey,
subject to liens, mortgage, and hypothecate, and in any way or manner deal with all or any part
ofany real or personal property, intangible and tangible, whatsoever, or any interest therein, which
I now own or may hereafter acquire, for me and in my name, and under such terms and conditions,
and under such covenants as such attorney in fact shall deem proper, including my homestead
property which I may own. If! am married, my attorney in fact may not mortgage or convey my
homestead property without joinder of my spouse or my spouse's legal guardian. Joinder by my
spouse may be accomplished by the exercise ofauthority in a durable power ofattorney executed
by my joining spouse, and either my spouse or I may appoint the other as attorney in fact;
e. To engage in and transact any and all lawful business ofwhatever nature or kind
2

for me and in my name;


f. To sign, endorse, execute, acknowledge, deliver, receive, and possess such

applications, contracts, agreements, bills of sale, leases, mortgages, assignments, insurance


policies, bills oflading, warehouse receipts, documents oftitle, bills, bonds, debentures, checks,
drafts, bills of exchange, notes, stock certificates, proxies, warrants, commercial paper, receipts,
withdrawal receipts and deposit instruments relating to accounts or deposits in, or certificates of
deposit of banks, savings and loan or other institutions or associations, proofs ofloss, evidences
ofdebts, releases, and satisfaction ofmortgages, judgments, liens, security agreements, and other
debts and obligations, and such other instruments in writing ofwhatever kind and nature as may
be necessary or proper in the exercise of the rights and powers herein granted;
g. Borrow money on such terms and with such security as my attorney in fact may
think fit and to execute all notes, mortgages and other instruments that my attorney in fact finds
necessary or desirable;
h. Enter any safe deposit box or other place of safekeeping standing in my name
alone or jointly with another and to remove the contents and to make additions, substitutions and
replacements;
i. To execute stock powers or similar documents on my behalfand delegate to a
transfer agent or similar person the authority to register any stocks, bonds, or other securities
either into or out of my name or nominee's name;
j. To represent me before the Treasury Department in connection with any matter
involving any federal taxes in which I am a party, to make, sign, execute, verifY and file any return
required to be made under the revenue laws ofthe United States, or the Internal Revenue Code,

or under the statutes of any state and to file any claim for refund, offer and compromise or
application for a closing agreement, receive refund checks, execute waivers of any period of
limitation, extensions of time, execute any waiver ofrestrictions on assessment for collection of
any tax, and execute Petition of Appeal to the United States Tax Court;
k. To make gifts ofcash or ofany interest that I may own in other assets and real
property to any person or entity,just as if I made the gifts myself, as long as any such transfers do
not incur any Federal or State Gift Tax liability; and

1. Transfer the title of any interest that I may own in property, whether it be
personal or real and however it be held, into the name of any living trust, and if necessary the
Successor Trustee of said trust, which I may have previously made or will make in the future.
2.

Full Real Estate Powers: My attorney in fact herein named is granted the authority

to sell, to convey, to maintain, to mortgage or to dispose ofthe following described real property,
and to execute any and all documents necessary to effectuate the sale and/or conveyance, and to
encumber, and to dispose of, the following described real property, unless previously titled in the
name of my Living Trust, if any:
See Exhibit "A" which is attached and incorporated hereto by reference.
Such documents shall include, but not be limited to, contracts, deeds, affidavits, bills of
sale, closing statements, mortgages, notes and such other instruments as may be required to carry
out the purposes herein expressed, and I hereby give and grant unto my attorney in fact named
herein, full authority and power to do and perform all and every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully, to all intents and purposes, as I might
or could do if personally present, with full power ofsubstitution and revocation, hereby ratifying
4

and confirming all that my attorney in fact shall lawfully do or cause to be done by virtue of the
power granted herein.
3.

Full Substitution: I grant to my attorney in fact full power and authority to do and

perform all and every act and thing whatsoever requisite, necessary, and proper and to be done
in the exercise of any ofthe rights and powers herein granted, as fully to all intents and purposes
as I might or could do if personally present, with full power of substitution or revocation, hereby
ratifying and confirming all that my attorney in fact, shall lawfully do or cause to be done by virtue
ofthis power of attorney and the rights and powers herein granted. The powers conferred upon
my attorney in fact extend to all of my right, title and interest in property in which I may have an
interest jointly with any other person, whether in an estate by the entirety, joint tenancy or tenancy
mcommon.
4.

Limitations: Notwithstanding the powers contained in this durable power of

attorney, my attorney in fact may not:


a. Perform duties under contract that requires the exercise ofmy personal services;
b. Make any affidavit as to my personal knowledge;
c. Vote in any public election on my behalf;
d. Execute, create, amend, modify or revoke any will, codicil or trust on my behalf;
and
e. Exercise powers and authority granted to me as trustee or as court-appointed
fiduciary.
5.

Standard ofCare: Except as otherwise provided herein, my attorney in fact named

herein is a fiduciary who must observe the standards of care applicable to trustees as described in
5

Florida Statute Section 737.302. My attorney in fact is not liable to third parties for any act
pursuant to this durable power of attorney if the act was authorized at the time. If the exercise
ofthe power is improper, my attorney in fact is liable to interested persons as described in Florida
Statute Section 731.201 for damage or loss resulting from a breach of fiduciary duty by my
attorney in fact to the same extent as the trustee of an express trust. If my attorney in fact has
accepted appointment either expressly in writing or by acting under the powers granted herein, my
attorney in fact is not excused from liability for failure to participate in the administration ofassets
subject to the powers granted herein or for failure to attempt to prevent a breach of fiduciary
obligations thereunder.
6.

Interpretation: This instrument is to be construed and interpreted as a durable

power ofattorney pursuant to Florida Statute Section 709.08. The enumeration ofspecific items,
acts, rights, or powers herein does not limit or restrict, and is not to be construed or interpreted
as limiting or restricting the general powers herein granted to my attorney in fact. This durable
power ofattorney shall not be affected by any physical or mental disability that I may suffer except
as provided by Florida Statute Section 709.08, and shall be exercisable from the date ofexecution.
All acts done by my attorney in fact pursuant to this durable power ofattorney shall bind me, my
heirs, devisees and personal representatives. This durable power of attorney is nondelegable.
7.

Governing Law: This instrument is executed by me in the State of Florida, but it

is my intention that this durable power of attorney shall be exercisable in any other state or
jurisdiction where I may have any property or interests in property. This instrument is executed
and delivered in the State of Florida and the laws ofthe State ofFlorida shall govern all questions
as to the validity of the powers herein and the construction of its provisions.
6

8.

Third Party Reliance:


a. Any third party may rely upon the authority granted in my durable power of

attorney until the third party has received notice as provided herein;
b. Until a third party has received notice of revocation pursuant to the terms
contained herein, partial or complete termination ofthis durable power ofattorney by adjudication
of incapacity, suspension by initiation of proceedings to determine incapacity, my death, or the
occurrence of an event referenced in this durable power of attorney, the third party may act in
reliance upon the authority granted in this durable power of attorney;
c. A third party that has not received written notice hereunder may, but need not,
require that my attorney in fact execute an affidavit stating that there has been no revocation,
partial or complete termination, or suspension of this durable power of attorney at the time this
power of attorney is exercised;
d. Third parties who act in reliance upon the authority granted to my attorney in
fact hereunder and in accordance with the instructions ofthe attorney in fact will be held harmless
by me from any loss suffered or liability incurred as a result of actions taken prior to receipt of
written notice of revocation, suspension, notice of petition to determine incapacity, partial or
complete revocation, or my death. A person who acts in good faith upon any representation,
direction, decision, or act ofmy attorney in fact is not liable to me or to my estate, beneficiaries,
or joint owners for those acts; and
e. My attorney in fact is not liable for any acts or decisions made by him or her in
good fuith and under the terms ofthis durable power of attorney.

9.

Notice:
a. A notice, including but not limited to, a notice ofrevocation, partial or complete

termination, suspension, or otherwise, is not effective until written notice is served upon my
attorney in fact or any third persons relying upon this durable power of attorney; and
b. Notice must be in writing and served on the person or entity to be bound by
such notice. Service may be by any form of mail that requires a signed receipt or by personal
delivery as provided in the Florida Statutes for service of process, and must otherwise be in
accordance with Florida Statutes Section 709.08.
10.

Damages and Costs: In any judicial action regarding this durable power of

attorney, including but not limited to, the unreasonable refusal of a third party to allow my
attorney in fact to act pursuant to the powers granted herein and/or challenge of the proper
exercise ofauthority by the attorney in fact, per statute, the prevailing party is entitled to damages
and costs, including reasonable attorney's fees.
11.

Validity: This durable power ofattorney shall be valid until such time as I shall die,

revoke this durable power ofattorney, either partially or completely, or shall be adjudged totally
or partially incompetent by a court ofcompetent jurisdiction. I may revoke this durable power of
attorney only by providing written notice to my attorney in fact. All acts of my attorney in fact,
taken or done without actual knowledge ofmy death, or adjudication of my incompetency or my
revocation, are valid and effective and are hereby ratified and confirmed by me.
12.

Revocation of Prior Instruments: By this instrument, I hereby revoke any power

ofattorney, durable or otherwise, that I may have executed prior to the date ofthis durable power
ofattorney. I hereby confirm all acts ofmy attorney in fact pursuant to the powers herein granted.

Any act that is done under the powers herein granted between the revocation of this instrument,
if any, and the notice of that revocation to my attorney in fact shall be valid unless the person
claiming the benefit of the act had notice of that revocation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this

2J ~T

day of_-----L0_~---=------*---,2006.
Signed, sealed and delivered

mthe~

~/!

N2~~~E'M~I~*r/0

Address: 8092 SW 115th Loop

~~~_----- -Ocala, Florida 34481

Name: MARYBETH BOWMAN


NOTARYACKNO~EDGMENT

STATE OF FLORIDA
COUNTY OF CITRUS
I HEREBY CERTIFY, that on this day personally appeared before me an officer duly
authorized to administer oaths and take acknowledgments, PENELOPE M. GILLESPIE, to me
personally known to be the person described in and who executed the foregoing instruments or
who provided
L
as identification, and she acknowledged and
swore before me that she executed the same freely and voluntarily for the purposes therein
expressed.
WITNESS, my hand and official seal at Inverness, County ofCitrus, and State ofFlorida,

rL- pi

this

d /S~

day of

Fh1L_J&~ , 2~2

This Document Prepared By:


Steven H.L. Bowman, Esquire
611 U.S. Highway 41 South
Inverness, Florida 34450
(352) 726-3800

~~~y~~

State of Florida at Larg(;Jr"'~~~:"~:~!~4~}~!!!!!!!~!!!!!!!!!~!!!!!!!!!~!!!!!!!!!!!!!!!l'I


My Commission Expire~ ~A:r~ MY C~~~I~~~~R~~~5451
;f,.~f;,ih~

EXPIRES: January 21, 2007

EXHIBIT "A"
Lot 1, Block G, OAK RUN WOODSIDE TRACT, as per plat thereofrecorded in Plat Book 2, pages
106 through 112, of the Public Records of Marion County, Florida.

32

33

FedEx Ship Manager - Print Your Label(s)

Page 1 of 1

ActWgt 1.0 LB
CAD: 291482511NET8091
Account#: S ~

T0111 DeBeauchcrnp
Bank of America
190 Queen Anne Ave N. #400

Delivery Address Bar Code

Seattle. WA 98109

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BILL SENDER

MS. PENELOPE M. GILLESPIE


8092 SW 105 LOOP

Ref#
Invoice #
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OCALA, FL 34481
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1/14/2009

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BANK OF AMERICA N.A.


30-1/1140
SEATTLE, WA
CONSUMER REAL ESTATE, SEATTLE, WA #0014007
AMOUNT: 38.89

N_BKE_4_W_P1_6200_932_430

Date: 01/06/09

COMMENTS:
NEGATIVE GROWTH REIMBURSEMENT CHECK

lOAN#:

68011002615899

CHECK

90565

MEMO:

NEGATIVE GROWTH REIMBURSEMENT CHECK

NON NEGOTIABLE

PENELOPE M. GILLESPIE
8092 SW 115TH LOOP
OCALA FL 34481

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PENELOPE M. GILLESPIE
8092 SW 115TH LOOP
OCALA FL 34481

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Date: 01/06/09

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January 14, 2009

PENELOPE M. GILLESPIE
8092 SW 115TH LOOP
OCALA, FL 34481

Re: 68011002615899
Dear Mortgagor(s):
This letter is being sent to you in regards to your recent inquiries about the Growth
accruing on your loan. The following paragraphs will describe how Growth is calculated
and how it reflects on your monthly statement. There are several components utilized in
the growth calculation process. Each of these components are listed below and the
calculations for each are described. For reference, copies of the Exhibit 1 Payment Plan
and the Home Equity Conversion Loan Agreement from your loan closing package have
been included with this letter.

Net Principal Limit


The Net Principal Limit reflects the funds available to a borrower at any given time.
These funds may be held in a Line of Credit, a Payment Reserve (for scheduled
payments), a Tax and Insurance Set Aside, or a combination of the three. The
calculation used to determine the Net Principal Limit at closing is the same calculation
used today. Examining the Exhibit 1 Payment Plan, Line 14 lists this calculation as
Principal Limit less Closing costs, Discharge of Liens, Loan Advances, Servicing Fee Set
Aside, Repairs, and First Year Property Charges. The Closing Costs, Discharge of
Liens and Loan Advances all make up the original Outstanding Loan Balance.
Using an example loan with a Principal Limit of $250,000.00, an Outstanding Loan
Balance of $75,000.00, a Servicing Fee Set Aside (SFSA) of $5,000.00, and $500.00
each for Repairs and First Year Property Charges the calculation works as follows:

$250,000.00 - $75,000.00 - $5,000.00 - $500.00 - $500.00

=$169,000.00

Principal Limit - Outstanding Loan Balance - SFSA - Repair & First Year

=Net Principal Limit

This calculation will be revisited towards the end of this letter to better describe the
Growth calculation process.

Principal Limit
The Principal Limit is equal to the total amount of funds available to a borrower at the
very outset of the Reverse Mortgage prior to any closing and loan origination deductions.
You will notice in the Exhibit 1 Payment Plan this figure is listed on the first line. It is this
figure that will grow each month by one-twelfth of the current interest rate plus .5%. This

37

Bankof America -.
.

calculation is set down by the Department of Housing and Urban Development (HUD)
and is listed under section 1.7 of the Loan Agreement included with this letter.

As stated above, the Principal Limit undergoes this calculation once a month (at the end
of business on the last day of the month). The product of this calculation, the Growth, is
then added back into the existing Principal Limit value to increase the Principal Limit to a
new value. Below is an example of how this calculation works:

$250,000.00 * (3.5% + .5%) /12 = $833.33


Principal Limit * Current rate + .5% / 12 = Growth
$250,000.00 + $833.33
Principal Limit + Growth

=$250,833.33

=New Principal Limit

Outstanding Loan Balance


Each month Interest, Mortgage Insurance, and the Monthly Servicing Fee accrue on the
Outstanding Loan Balance. The Monthly Servicing Fee is a set amount; however,
interest and Mortgage Insurance (MIP) are based on rates, existing balances, and
advances and will vary over the life of the loan. These monthly accruals are added to
the eXisting Outstanding Loan Balance on the last day of the month similar to the way in
which Growth is added to the Principal Limit. The interest and MIP calculations are a bit
more complex as they differ between monthly and daily accruals
Interest
Interest accrues based on the current interest rate in effect at the time which interest is
calculated. As mentioned above the calculation method may vary slightly depending on
whether the monthly or daily (or both) calculation methods are used. The monthly
interest calculation is based on the prior month's ending Outstanding Loan Balance,
while the daily interest calculation is used to calculate interest on advances made from
the loan. The daily calculation is used to ensure borrowers are only charged interest for
the number of days the advance was outstanding. An example of how this calculation
will work on loan with a $75,000.00 Outstanding Loan Balance from the previous month
end and a $2,000.00 advance taken on the 5th day of a 30 day month is as follows:

$75,000.00 * 3.5% /12 = $218.75

Prior Month's Ending Balance * Current Interest Rate I 12 = Monthly Interest

$2,000.00 * 3.5% /365 * 25 = $4.79

Advance Amount * Current Interest Rate 1# of days in the year * # of days outstanding

=Daily Interest

$218.75 + $4.79 = $223.54

Monthly Interest + Daily Interest

=Total Interest Accrual

In the example above there was Monthly and Daily interest accrued on the loan. These
two figures were then added together to provide the Total Interest Accrual for the month
which is the figure that would reflect on the monthly statement.
MIP

Bankof America .

Mortgage Insurance works much the same way interest does. There is only one notable
difference between the two. While the rate used to calculate interest will vary over the
life of the loan, the MIP calculation uses a set .5% rate to calculate. Using the same
example listed above for the interest accrual, the MIP calculations below show how this
calculation would work:

$75,000 * .5% 112 $31.25

Prior Month's Ending Balance * .5% / 12 =Monthly MIP

$2,000.00 * .5% I 365 * 25

=$0.68

Advance Amount * .5% / # of days in the year * # of days outstanding = Daily MIP

$31.25 + $0.68 = $31.93

Monthly MIP + Daily MIP = Total MIP Accrual

Servicing Fee
The monthly Servicing Fee amount was set at closing and will accrue on the Reverse
Mortgage at the end of each month along with the interest and MIP. Using the
calculations listed above with a monthly Servicing Fee of $30.00, the new Outstanding
Loan Balance would reflect as:
$75,000.00 + $2,000.00 + $223.54 + $31.93 + $30.00
Prior Month's Balance + Advance + Interest + MIP + Servicing Fee

=$77,285.47

=New Outstanding Loan Balance

Servicing Fee Set Aside


The Servicing Fee Set Aside is a value calculated at closing. It represents the total
estimated funds that need to be set aside from the Principal Limit to ensure the monthly
Servicing Fee can be accrued on the Outstanding Loan Balance every month. This
figure is also listed on the Exhibit 1 Payment Plan and undergoes its own set of monthly
calculations.
Before describing the calculations used on the Servicing Fee Set Aside (SFSA) it is
important to discuss how the initial SFSA shown on the Payment Plan was calculated at
closing. The initial value was calculated using the monthly Servicing Fee amount, the
Expected Average Interest Rate (also listed on the Payment Plan), and the number of
months remaining until the youngest borrower's 100th birthday. You will notice however
that the monthly Servicin~ Fee amount multiplied by the number of month's until the
youngest borrower's 100 birthday produces a much higher figure than that listed on the
Payment Plan. This is because the SFSA grows every month as well and this monthly
growth was taken into account when the initial SFSA value was calculated at closing.
The Servicing Fee Set Aside goes through a set of calculations each month to arrive at
new figures. First the monthly Servicing Fee being added to the Outstanding Loan
Balance is deducted. Then the Growth on the SFSA is calculated and added back to the
remaining balance. For example:
$5,000.00 - $30.00

=$4,970.00

SFSA - Monthly Servicing Fee

=Adjusted SFSA

$4,970.00 * (4.3% + .5%) /12 = $19.88

..

BankofAmerica ~
.

Adjusted SFSA * Expected Average Interest Rate + .5% / 12 = SFSA Growth

$4,970.00 + $19.88 = $4,989.88

Adjusted SFSA + SFSA Growth

=New SFSA

As listed above, the SFSA value decreased and then grew using the Expected Average
Interest Rate as opposed to the current interest rate used to calculate Growth on the
Principal Limit. The Expected Average Interest Rate is another value determined and
set at closing. It will remain the same value for the life of the loan.

Repairs and First Year Property Charges


If there are repairs required as a stipulation to obtaining the Reverse Mortgage, or if a
borrower has elected to set aside funds from the Principal Limit to pay the property taxes
and homeowner's insurance for the first year of the loan, the Repair and/or First Year
Set Asides are created. These values will decrease as the necessary repairs, taxes, or
insurance are paid.

Net Principal Limit (Revisited)


Now that each of the components of Growth have been discussed, refer back to the
initial Net Principal Limit calculation discussed at the beginning of this letter. The
calculation is listed as:

$250,000.00 - $75,000.00 - $5,000.00 - $500.00 - $500.00

=$169,000.00

Principal Limit - Outstanding Loan Balance - SFSA - Repair & First Year = Net Principal Limit

Using this as an example, the preceding sections have covered how each of these
figures grows and adjusts. After the next month end, the Net Principal Limit of
$169,000.00 changes to $167,560.05 by using the calculation:

$250,833.33 - $77,285.47 - $4,989.88 - $500.00 - $500.00 = $ 167,557.98

Principal Limit - Outstanding Loan Balance - SFSA - Repair & First Year = Net Principal Limit

On the surface, this may seem to be a decrease in the Net Principal Limit. However, if
we take into consideration that there was a $2,000.00 advance added to the loan .
balance (see Outstanding Loan Balance section), we can see there is actually an
increase in the Net Principal Limit of $557.98. To better highlight this, let's run through
another month of calculations using the new figures provided above.
Principal Limit

$250,833.33 * (3.5% + .5%) /12 = $836.11


Principal Limit * Current rate + .5% / 12 = Growth
$250,833.33+ $836.11 = $251,669.44
Principal Limit + Growth

=New Principal Limit

Outstanding Loan Balance

$77,285.47 * 3.5% /12 = $225.42

Bankof America .....


Prior Month's Ending Balance * Current Interest Rate / 12

=Monthly Interest

$77,285.47 * .5% /12 = $32.20

Prior Month's Ending Balance * .5% / 12 =Monthly MIP

$77,285.47 + $225.42 + $32.20 + $30.00 = $77,573.09

Prior Month's Balance + Interest + MIP + Servicing Fee = New Outstanding Loan Balance

Servicing Fee Set Aside

$4,989.88 - $30.00

=$4,959.88

SFSA - Monthly Servicing Fee = Adjusted SFSA

$4,959.88 * (4.3% + .5%) /12

=$19.84

Adjusted SFSA * Expected Average Interest Rate + .5% / 12 = SFSA Growth

$4,959.88 + $19.84 $4,979.72

Adjusted SFSA + SFSA Growth =New SFSA

Net Principal Limit

$251,669.44 - $77,573.09 - $4,979.72 - $500.00 - $500.00

=$168,116.63

Principal Limit - Outstanding Loan Balance - SFSA - Repair & First Year

=Net Principal Limit

The calculations listed above differ than those previously discussed only in that there
was no advance. In this scenario the Net Principal Limit changed from $167,557.98 to
$168,116.63, an increase of $558.65. This value will be reflected on the monthly
statement as the Net Principal Limit Increase just like the $557.98 figure did. This figure
reflects the net increase in the funds available to a borrower at any given time, or the
Growth.
I hope this letter has served to clarify the Growth process. The calculations referenced in
this letter are quite complex and as such your Reverse Servicing department welcomes
any questions you may have regarding the calculations. Please do not hesitate to
contact one of our specialists at the toll free number listed below with questions
regarding Growth or any other facet of your Reverse Mortgage.

iZ

Karen Yantis
Bank of America
Reverse Servicing Division
190 Queen Anne Ave. N. Suite 400
Seattle, WA 98109
1-866-863-5224

Negative Growth
There is also the potential for the Net Principal Limit to begin decreasing. This phenomenon is
referred to as Negative Growth and will only occur on a Reverse Mortgage when certain
conditions are place, namely that the current interest rate is less than the expected average
interest rate and that the Net Principal Limit has a relatively small existing balance. When the
HUD calculations are used on a monthly basis to calculate the available funds (Net Principal
Limit), they will begin to decrease even though no advances were taken on the account. For
example, using the loan figures listed below we can see the Net Principal Limit is relatively small.

$250,000.00 - $243,000.00 - 5,000.00 - $500.00 - $500.00 = $1,000.00

Principal Limit - Outstanding Loan Balance - SFSA - Repair & First Year

=Net Principal Limit

If the current interest rate was 3.5% and the expected average interest rate was 5.5% the
calculations would reflect as follows:

Principal Limit

$250,000.00 * (3.5% + .5%) /12 = $833.33


Principal Limit * Current rate + .5% / 12 = Growth

$250,000.00 + $833.33 = $250,833.33

Principal Limit + Growth = New Principal Limit

Outstanding Loan Balance

$243,000.00 * 3.50/0 /12 = $708.75

Prior Month's Ending Balance * Current Interest Rate / 12 = Monthly Interest

$243,000.00 * .5% /12 = $101.25

Prior Month's Ending Balance * .5% / 12 = Monthly MIP

$243,000.00 + $708.75 + $101.25 + $30.00 = $ 243,840.00


Prior Month's Balance + Interest + MIP + Servicing Fee = New Outstanding Loan Balance

Servicing Fee Set Aside

$5,000.00 - 30.00 = $4,970.00

SFSA - Monthly Servicing Fee

=Adjusted SFSA

$4,970.00 * (5.5% + .50/0) /12 = $24.85

Adjusted SFSA * Expected Average Interest Rate + .5% / 12 = SFSA Growth

$4,970.00 + $24.85

=$4,994.85

Adjusted SFSA + SFSA Growth = New SFSA

Net Principal Limit

$250,833.33 - $243,840.00 - $4,994.85 - $500.00 - $500.00 = $998.48


Principal Limit - Outstanding Loan Balance - SFSA - Repair & First Year = Net Principal Limit

In this scenario the Net Principal Limit shows a clear decrease from $1,000.00 to $998.48. So
long as the expected average interest rate remains higher than the current interest rate, the
available Net Principal Limit will continue to decrease.

Bank of America has contacted the Department of Housing and Urban Development to notify
them of the calculation results and Negative Growth. However, there is a reimbursement process
in place to ensure our borrowers are not impacted by the results of Negative Growth. You will
find a Negative Growth Reimbursement Form attached to this letter. To seek reimbursement for
any funds lost due to Negative Growth all you need do is sign the form and send it back to the
Reverse Servicing Department. Doing so authorizes the Reverse Servicing Department to
release the remaining funds to you (to prevent further Negative Growth deductions) and to
reimburse you for funds lost to Negative Growth. Reverse Servicing Specialists will ensure you
are fully reimbursed for the most recent highest dollar amount available in your Net Principal
Limit. The Negative Growth Reimbursement check will be sent to your mailing address within 10
business days of receipt of the request.
Should you have any questions regarding Negative Growth or the reimbursement process, please
don't hesitate to contact one of our Reverse Servicing Specialists at the toll free number provided
on the Growth Calculation letter.

BankofAmerica. . . .

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38

39

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2012 >

HUDNo.12-026

HUD No. 12-026


United States Attorney
Eastern District of New York
271 Cadman Plaza East
Brooklyn, New York 11201
Contact: Robert Nardoza
United States Attorney's Office
(718) 254-6323

FOR RELEASE
Thursday
February 9, 2012

$1 BILLION TO BE PAID BY THE BANK OF AMERICA


TO THE UNITED STATES LARGEST FALSE CLAIMS ACT
SETTLEMENT RELATING TO MORTGAGE FRAUD

Agreement Resolves the United States' Civil Claims that


Bank of America, Through its Countrywide Financial
Subsidiaries, Defrauded the Federal Housing
Administration by Recklessly and Fraudulently
Underwriting Loans to Unqualified Borrowers
Agreement Also Resolves Claims Involving Home
Affordable Modification Program
As part of the global resolution between the United States
of America and the five largest mortgage servicing banks
in the country, which will bring much needed relief to
financially distressed homeowners nationwide, Loretta E.
Lynch, United States Attorney for the Eastern District of
New York, today announced that the government will also
resolve its claims against the Bank of America,
Countrywide Financial Corporation and certain
Countrywide subsidiaries and affiliates (Countrywide) for
underwriting and origination mortgage fraud.
Since 2009, the office has been investigating the Bank of
America's lending practices to determine whether the
bank, through Countrywide, which the bank acquired in
2008, knowingly made loans insured by the Federal
Housing Administration (FHA) to unqualified home
buyers. To date, the FHA has incurred hundreds of
millions of dollars in damages as a result of this conduct.
The investigation also encompassed allegations that the

40

7/8/2012 1:24 PM

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bank and Countrywide defrauded the FHA insurance fund


by originating mortgage loans that were based upon
inflated appraisals. During the investigation, the office
determined that the bank's conduct provides a basis for
affirmative civil enforcement under, among other legal
remedies, the False Claims Act, 31 U.S.C. 3729-33.
As part of the global settlement, Bank of America will pay
$1 billion to resolve the wrongdoing uncovered during the
office's investigation. The settlement will entail an
immediate payment of $500 million to provide a recovery
for the harm done to the FHA by Countrywide's conduct.
Payment of the second $500 million will be deferred to
fund a loan modification program for Countrywide
borrowers across the nation with underwater mortgages.
Under the terms of the program, Bank of America will
solicit all potentially eligible borrowers and provide a loan
modification to anyone with an eligible mortgage who
accepts the offer. If, after the expiration of three years,
the bank has not met its obligation to apply the full $500
million to provide such relief, any remainder will be paid
directly to the United States.
"We announce today the largest ever False Claims Act
settlement relating to mortgage fraud. Through their
underwriting and origination of tens of thousands of
government-insured loans to unqualified borrowers,
Countrywide Financial subsidiaries systematically abused
the Federal Housing Administration and became some of
the main players in this country's financial crisis. We are
committed to protecting the FHA's ability to provide
assistance to qualified low income and first-time
home-buyers, and this settlement goes a long way
toward that end. It also puts lenders on notice that they
will face serious financial consequences for violating their
obligations under the FHA's programs," stated United
States Attorney Lynch.
Ms. Lynch expressed her grateful appreciation for the
assistance provided by Shaun Donovan, Secretary of the
Department of Housing and Urban Development (HUD);
Helen Kanovsky, General Counsel for HUD; David
Montoya, Inspector General for HUD; and Julie Shaffer,
Director of the HUD Philadelphia Home Ownership Center.

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"It is fundamental that lending institutions that earn the


authority to directly endorse FHA-insured mortgages
apply our standards," said HUD Secretary Donovan. "This
is the largest false claims act settlement related to
mortgage fraud and will not only compensate FHA but will
also ensure assistance for homeowners who have been
harmed by Countrywide."
"This agreement is demonstrative, and should serve as a
model, of what results can be achieved when agencies of
the United States Government join forces in a united
effort to combat fraud in the FHA insured mortgage
program," said Inspector General Montoya. "OIG staff
served IG subpoenas, conducted multiple interviews,
reviewed loan files, and worked closely with the U.S.
Attorney's office in developing this case." He further
added, "I am appreciative of the tenacity with which the
Assistant United States Attorneys approached this
matter, the expertise and effort of my OIG auditors,
investigators and legal team, and the assistance of the
HUD Office of General Counsel and its Office of Program
Enforcement and Philadelphia Home Ownership Center
throughout this endeavor."
The settlement announced today also resolves the office's
investigation, conducted with the Special Inspector
General for the Troubled Asset Relief Program and the
Inspector General for the Federal Housing Finance
Agency, of allegations that Bank of America defrauded
the government by failing to determine the eligibility of
homeowners to participate in the government's Home
Affordable Modification Program. Ms. Lynch thanked
Christy L. Romero, Acting Special Inspector General for
the Troubled Asset Relief Program, and Steve A. Linick,
the Inspector General for the Federal Housing Finance
Agency, for their assistance in this investigation.
The Eastern District's investigation was conducted by
Assistant United States Attorneys Richard K. Hayes and
Kenneth M. Abell, Affirmative Civil Enforcement Auditor
Emily Rosenthal, Senior Trial Counsel, Commercial
Litigation Branch, United States Department of Justice,
William C. Edgar, and Trial Attorney, Commercial
Litigation Branch, United States Department of Justice,

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John Warshawsky.
The joint federal-state agreement is part of enforcement
efforts by President Barack Obama's Financial Fraud
Enforcement Task Force. President Obama established
the interagency task force to wage an aggressive,
coordinated and proactive effort to investigate and
prosecute financial crimes. The task force includes
representatives from a broad range of federal agencies,
regulatory authorities, inspectors general and state and
local law enforcement who, working together, bring to
bear a powerful array of criminal and civil enforcement
resources. The task force is working to improve efforts
across the federal executive branch, and with state and
local partners, to investigate and prosecute significant
financial crimes, ensure just and effective punishment for
those who perpetrate financial crimes, combat
discrimination in the lending and financial markets, and
recover proceeds for victims of financial crimes. For more
information about the task force visit: www.stopfraud.gov.

7/8/2012 1:24 PM

B.10 Reviewing the Clients Level of Understanding


The content of a reverse mortgage counseling session is comprehensive and complex. A truly
informed decision to apply for a reverse mortgage requires both an understanding of the essential
elements of the loan and the ability to apply that knowledge to the clients individual situation.
Part of the counselors role is to review, during and at the end of every session, whether the
client has been adequately informed and has a level of understanding indicating he or she grasps
the fundamental facts of a reverse mortgage.
When providing counseling by telephone, counselors must be particularly sensitive to a clients
level of understanding. Counselors must sometimes judge whether a client has adequate ability
to participate in the counseling session, to make reasonable decisions based on the information
provided by the counselor, and to understand the risks and consequences of his or her decisions
regarding a reverse mortgage.
Review Questions
During the session, counselors must ask ten questions to determine whether the client has
understood the essential features of the reverse mortgage. These questions explore some of the
most fundamental facts about reverse mortgages things that every adequately informed client
must know. The counselor must disclose to the client that questions will be asked during the
counseling session to determine if the client understands the information being discussed.
These questions must not be given as a written test, nor are they to be presented as something the
client has to pass in order to get the loan. Presenting the questions in these ways may
intimidate some clients, causing them to get confused when trying to answer the questions. This
means that counselors must be familiar with the set of questions provided, so that they can ask
the questions conversationally, framed as a review of the most important concepts presented
during the session.
As an example, after discussing when the loan needs to be repaid, the counselor might say: I
want to make sure I am explaining things to you clearly, so I will periodically ask you some
questions to make sure. This also gives me a way to emphasize some key aspects of a reverse
mortgage. Heres question number 1. When will you need to pay back your Reverse Mortgage
loan? If a client answers incorrectly, the counselor can discuss the concept further and ask the
question again.
Clients must answer five questions correctly to receive the Counseling Certificate at the initial
counseling session. For additional instructions on what counselors should do if the client cannot
answer five questions correctly see the section titled Results of the Review. Counselors must be
aware of financially savvy clients when posing questions and adopt the appropriate tone and
delivery of these questions. For clients who seem to be having trouble remembering the
information, prompts may be given to assist the client in answering the questions. If the client
gets a question wrong or only partially right, the counselor should try a prompt or rephrase the
question to see if that helps, and then briefly review the right answer before going on to the next
question. Whenever possible, avoid yes/no questions.

145

41

If there are two or more borrowers, the counselor may request that each client alternate
answering questions. In addition, if one client appears to be quieter and less involved during the
session, the counselor may direct the questions entirely to that client, while asking the other
client to remain silent. If the quiet client cannot respond, then the counselor may allow the other
one to answer the question. The counselor must avoid allowing a dominant client to completely
take over the question and answer exchange.
When counseling an older adult with a son or daughter or other advisor present, the counselor
must direct questions to the homeowner and ask the other person to remain silent. It may be
necessary in some cases to ask the other person to leave the room in order to get a good idea of
whether the client has understood the essential features of the reverse mortgage.
If the client is accompanied by a legal representative (e.g., someone who has durable power of
attorney), direct the questions to the client whenever possible, asking the agent to remain silent
until the client has attempted to answer. If the client is unable to respond adequately, the
certificate should be signed by the legal representative only and should include the notation that
the client was unable to fully participate in counseling.
The following are lists of questions from which the counselor must chose ten to ask the client:
General Questions About Reverse Mortgages and HECMs
When you have a reverse mortgage, who owns your house (whose name is on the title/deed)?
There are several payment options or ways to get money from a reverse mortgage. Which
payment option do you think will best meet your needs? What other choices do you have (if
applicable)? What happens if you change your mind later and want to change your payment
plan?
When you have a reverse mortgage, do you have to make a monthly payment to the bank?
Does the money you get from a reverse mortgage ever have to be paid back?
Questions to determine if the client understands the implications of a reverse mortgage
When does the reverse mortgage have to be paid back?
What homeowner responsibilities will you continue to have after you get a reverse mortgage?
What may happen if you do not keep up these responsibilities as a borrower?
What happens if you use up all the money that is available from the reverse mortgage?
Offer an example tailored to clients circumstances, e.g., What if you took all the money
from the reverse mortgage in a lump sum and spent every bit of it? What would happen to
you? Would you be able to go on living in your house?

146

What happens if the amount you owe under a reverse mortgage gets to be greater than your
home is worth at that time? Would you have to move out of your house? Would you have to
take out another loan to pay the difference?
If you get a reverse mortgage, how does that change the amount of money that you will have
to leave to your children (or other heirs)? Will your children or other heirs inherit more or
less after you die, than they would have without the reverse mortgage?
How does a reverse mortgage change the amount of money you would have left to take with
you if you moved somewhere else like into a retirement community? Will you have more or
less left over to spend if you move somewhere else?
Questions for Refinances
If you refinance your current HECM, will you still have to pay mortgage insurance? How
does this work?
What are some of the additional costs you will incur with a refinance?
Questions for Purchase HECMs
When you purchase a home with a HECM, will the HECM be held on your existing home or
your newly purchased home?
How will the lender determine how much money you will need at closing? What sources of
funds (money) are allowed when you purchase a home with a HECM?
Why is it important to get a home inspection?
When you are working with a real estate professional, what are some of the questions you
should ask him/her?
Results of the Review
Counselors must make detailed notes about difficulties the client has in answering questions,
particularly when the answers are grossly inadequate, as this will help support any decision to
withhold or delay issuing the certificate.
Because these questions are meant to test the most basic reverse mortgage concepts, if the client
cannot provide adequate answers for five questions, there may be concern about his or her ability
to make an adequately informed reverse mortgage decision. If that is the case, the counselor
must not issue the counseling certificate after the first counseling session, but must propose
additional ways to help the client gain the necessary knowledge. These options must meet the
clients specific needs.
The counselor will offer one or more of the following in order to answer the 5 out of 10
questions correctly.

147

Schedule an additional session to allow more time to review important topics and possibly at
a different time of day, or
Help the client to arrange a face-to-face counseling session with the original counselor or
another counselor, or
Ask the client if there is someone else he or she could bring with them to or could join in a
phone counseling session and schedule another session to include this person.
During any additional counseling sessions, the counselor will ask the review questions again. If
the client again is not able to correctly answer five out of the ten questions, the counselor will
ask the client if they would like additional time and invite them to come back at a later date after
they have had more time to study the materials. A certificate cannot be issued until the client
correctly answers 5 out of the 10 questions.
Fraud and Coercion
Although fraud and coercion are not limited to clients with impaired ability to understand and
make decisions, cognitively impaired clients are more vulnerable to such exploitation.
Counselors should be especially sensitive to the possibility that such a client is being pushed into
an inappropriate choice by others who do not have the clients best interests at heart. If the
counselor feels that: 1) the client was coerced into pursuing a reverse mortgage, or 2) the client
may be a victim of elder abuse or exploitation, the counselor should advise clients that each state
has an elder abuse hotline and provide them with the hotline phone number in the clients state.
Hotline numbers can be found at
http://www.ncea.aoa.gov/NCEAroot/Main_Site/Find_Help/Help_Hotline.aspx

148

General Allegations
HUD Statement on Predatory Lending - HECM Calculator for Housing Industry
HUDs webpage on Predatory Lending, found at the link below, begins as follows:
Over the last several years, our nation has made enormous progress in expanding access
to capital for previously under served borrowers. Despite this progress, however, too
many families are suffering today because of a growing incidence of abusive practices in
a segment of the mortgage lending market. Predatory mortgage lending practices strip
borrowers of home equity and threaten families with foreclosure, destabilizing the very
communities that are beginning to enjoy the fruits of our nations economic success.
Read more at the link.
http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/pred/predlend
Ironically, as shown in the Gillespie complaint, HUD makes inflated or unrealistic
financial projections to borrowers, a practice that strips borrowers of home equity,
threatens families with foreclosure, and destabilizes communities. HUD provides false
and misleading financial information to borrowers in its Reverse Mortgage Analyst, Loan
Product Comparison Tool, and Financial Calculators. Telling senior citizens that they can
expect a four (4) percent rise in property value every year is akin to appraisal fraud in a
reverse mortgage, where a HECM reverse mortgage with a line of credit is supposed to
allow the borrowers access to the projected four (4) percent annual home appreciation as
shown in The Reverse Mortgage Analyst.
HUD has a webpage for Housing industry professionals to download the Home Equity
Conversion Mortgages calculator, see Installation Instructions for HECM Software.
http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/hecm/hecminst
It appears that HUD creates false and misleading financial information through its Home
Equity Conversion Mortgages calculator for Housing industry professionals. Housing
industry professionals then use this false and misleading information to sell HECM
reverse mortgages to unsuspecting and vulnerable senior citizens. As shown in our case,
this practice strips borrowers of home equity and threatens families with foreclosure.
Wikipedia describes predatory lending as unfair, deceptive, or fraudulent practices of
some lenders during the loan origination process.
http://en.wikipedia.org/wiki/Predatory_lending
HUDs Fiduciary Duty to Borrowers
HUD has a duty to educate families and individuals in order to help them make smart
decisions regarding improving their housing situation and meeting the responsibilities of
tenancy and homeownership. Section 255(d)(2)(B) of the National Housing Act (12 USC

42

1715z-20(d)(2)(B)) provides that to be eligible for insurance, a HECM must be executed


by a mortgagor who received adequate counseling by a third party (other than the
lender). Subsection 255(f) establishes that the Department shall provide, or cause to be
provided by entities other than the lender, housing counseling for HECM mortgagors.
HUDs Reverse Mortgage Handbook 7610.1 describes the Primary Objective of
counseling, and Persons in a Position of Trust in HUD-approved housing counseling
agencies:
Section 1-2, Program Description, The primary objective of the program is to
educate families and individuals in order to help them make smart decisions regarding
improving their housing situation and meeting the responsibilities of tenancy and
homeownership. Counselors also help borrowers avoid inflated appraisals, unreasonably
high interest rates, unaffordable repayment terms and other conditions that can result in a
loss of equity, increased debt, default and possible foreclosure. Section 1-3 requires
compliance with program requirements.
Section 1-4 defines HUD-approved housing counseling agencies, defines their
employees as persons in a position of trust, and describes predatory lending as
unscrupulous actions by lenders, appraisers, mortgage brokers, and other industry
participants that take advantage of mortgagors and can result in a loss of equity,
increased debt, default and possible foreclosure. Section 1-5 describes HUD Program
Responsibilities.
Consumer Credit Counseling Services, Money Management International Incorporated
(CCCS/MMI) was the HUD-approved housing counseling agency for this loan.
According to Wikipedia, in its 2007 Annual Report, MMI identified Bank of America as
a major contributor. MMI failed to disclose this conflict of interest during the reverse
mortgage counseling session.
http://en.wikipedia.org/wiki/Money_Management_International
A fiduciary duty is the highest standard of care at either equity or law. In a fiduciary
relationship, one person, in a position of vulnerability, justifiably vests confidence, good
faith, reliance and trust in another whose aid, advice or protection is sought in some
matter. (Wikipedia)
http://en.wikipedia.org/wiki/Fiduciary