Attorney General Cuomo Protects Senior Homeowners From Misleading Reverse Mortgage Solicitations

SYRACUSE, N.Y. (April 24, 2008) – Attorney General Andrew M. Cuomo today announced his office has stopped a Syracuse-area reverse mortgage lender from preying on seniors statewide through false advertising and portraying itself to be a local non-profit organization.

Under a settlement reached by the Attorney General’s Office, Upstate Capital, Inc. of Basile Rowe in East Syracuse, must reform its marketing practices and indicate that it is a registered mortgage/reverse mortgage broker. The company must also pay $20,000 in costs and penalties to the state.

This settlement is one of several initiatives the Attorney General has undertaken to help stem the tide of abuse and fraud in the mortgage and housing industries.
“Consumers must remain vigilant in the midst of the national mortgage crisis,” said Attorney General Cuomo. “There are unscrupulous individuals seeking to take advantage of homeowners who have worked hard their whole lives to secure equity in their properties. This settlement serves as both a victory for New York’s homeowners and a warning to all companies that they must clearly state their intentions when seeking business from unsuspecting consumers.”

In an attempt to solicit business from senior homeowners across the state, Upstate Capital presented itself in promotional materials and flyers as the Association for Better Living (ABL), Inc., a non-profit organization. Before ceasing operations in 2002, ABL specialized in upgrading housing conditions in Central New York. Michael Gilman of Dewitt happens to be Director of Operations for Upstate Capital as well as President of ABL.

Starting in July of 2007, Upstate Capital sent flyers portraying itself as ABL to seniors statewide promoting a “new government program” that “protects seniors” by providing a monthly, tax-free income with no income or credit qualifications. The company also claimed that the “lifetime” program required no repayments.  Consumers were directed to call the company to obtain a free packet of information on the program. They would then be contacted by an Upstate Capital representative “on behalf” of ABL.

The solicitation, however, neglected to say that the source of the money was actually a loan, and that the product the company is peddling was actually a reverse mortgage.

A reverse mortgage is a loan product available to seniors (62 and over in the United States), and is used to release the home equity in the property as one lump sum or multiple payments.  In a reverse mortgage, the home owner makes no payments and all interest is added to the lien on the property, which is due and payable upon the transfer or non-use of the property by the homeowner.

As outlined in the settlement with Attorney General Cuomo’s Office, Upstate Capital:

  • Will no longer refer to or associate with ABL
  • Reform advertisements and solicitations to clearly indicate that the company is a state-registered mortgage broker, an FHA-licensed lender and broker of reverse mortgage loans
  • Clearly state that the reverse mortgage product it is selling is an FHA/HUD Home Equity Conversion Mortgage and that there are no monthly payments required during the time the borrower lives in the house
  • Stop implying that the existing HUD reverse mortgage program is a new “Senior Benefit Program”

Also under the agreement, ABL will not imply that it is connected with the business activities of Upstate Capital, must stop doing business immediately and commence dissolution by June 3.

In 2008 alone, Attorney General Cuomo’s commitment to exposing and stopping fraud in the housing and mortgage industries has included:

  • Establishing a “New Home Valuation Protection Code” with the two largest purchasers of home loans, Fannie Mae and Freddie Mac
  • Seeking contempt-of-court against a Niagara Falls man who tried to defraud investors through a Western New York house-flipping scheme
  • Shutting down a custom home builder and several home improvement contractors across the state that repeatedly defrauded consumers
  • Protecting tenants at a Rome apartment complex from wrongful eviction

Attorney General Cuomo urges New York seniors to know their rights and have the best information at hand when dealing with housing issues. The Attorney General’s Housing Guide for Senior Citizens is available online at Senior Housing Guide

Consumers who believe they have been defrauded are urged to contact Attorney General Cuomo’s Consumer Help Line at 800-771-7755.

The Upstate Capital case was handled by Assistant Attorneys General Judith Malkin and Christopher Wiles under the supervision of Assistant Attorney General-in-Charge Ed Thompson of the Syracuse Regional Office.

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