A San Capistrano, Calif., financial services adviser is alleging in a lawsuit that Fannie Mae, the American Association of Retired Persons, and the Department of Housing and Urban Development conspired with other lenders to monopolize the reverse mortgage market.
In a suit filed last week in U.S. district court in Washington, Patriot Inc. is charging that the defendants violated antitrust laws.
Patriot helps seniors to arrange reverse mortgages, which provide cash in exchange for equity in borrowers' homes. The firm then markets annuities to borrowers. The company has been waging battle since March 17 of last year, when HUD released the results of an investigation that concluded Patriot was charging nearly 10% of the loan amounts in origination fees.
HUD issued a letter saying it would no longer insure reverse mortgage loans generated by Patriot or other third parties. Fannie Mae, which purchases the loans, said later that it would no longer buy third-party loans. The moves have decimated Patriot's business, an attorney for Patriot said.
Patriot is a direct competitor with the American Association of Retired Persons in the annuities market, the company said. The AARP receives fees from banks that market directly to association members, the company said.
"The AARP, by its participation in this conspiracy, was also attempting to maintain its vast power and position in the marketing of insurance, investments, and mortgage services to the elderly," the suit said.
Despite a temporary restraining order issued by a U.S. district attorney ordering Fannie Mae to purchase these loans, Patriot has been unable to find a lender to accept a reverse mortgage referral, the company said.
Reverse mortgage loans account for about 75% of the company's business, said Jed Babbin, Patriot's attorney.
"The conspiracy and refusal to deal by defendants was intended to and has had the effect of completely, and retroactively, terminating Patriot's business," the suit states.
The company says it is providing services to seniors that they cannot get from HUD or from mortgage lenders.
The defendants all declined to comment on the suit.