The U.S. Department of Housing and Urban Development said yesterday it is seeking to permanently withdraw its approval of Financial Mortgage USA, Inc., a Honolulu-based reverse mortgage lender.

HUD said its Mortgage Review Board alleges that Financial Mortgage USA failed to:
— Implement Federal Housing Authority-required quality control plans.
— Separate its lending operations from those of its affiliated insurance company.
— Conform to prudent lending practices.
— Properly provide borrowers with housing counseling services.
Financial Mortgage USA has 30 days to respond and seek a hearing before an administrative law judge.
The company has vacated its office on Kapiolani Boulevard and disconnected its telephone.
HUD’s review board also is imposing the maximum $97,500 civil money penalty available against Financial Mortgage USA.
"FHA will not tolerate lenders who violate our rules and prey on those who depend on a reverse mortgage to continue to live independently," FHA Commissioner David Stevens said in a news release.
HUD alleges that by failing to maintain a clear separation between its affiliated insurance company, Financial Mortgage USA confused elderly borrowers who could not tell with whom they were doing business.
HUD says Financial Mortgage USA failed to discuss the options for receiving home equity conversion proceeds with borrowers or simply ignored borrowers' stated preferences in disbursing the proceeds.
HUD says Financial Mortgage USA and its affiliate, Estate Planners of America, then duped the borrowers into purchasing annuities from Estate Planners of America, which borrowers did not request and did not understand had been purchased.
HUD says its review board was particularly concerned about one case in which Financial Mortgage USA steered an 88-year-old borrower into purchasing an annuity which would not mature until she reached her 104th birthday.