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Press Release

Middle District Of Florida’s Civil Division Advances Reverse Mortgage Fraud Enforcement Initiative By Resolving Civil Fraud Claims Against Tarpon Springs Condominium Complex Owner

For Immediate Release
U.S. Attorney's Office, Middle District of Florida

Tampa, FL – Acting United States Attorney W. Stephen Muldrow announces a civil settlement with Alexander Olympus Zarris that resolves alleged violations of the False Claims Act (“FCA”) and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”) through reverse mortgage transactions engineered by Zarris at a Tarpon Springs condominium complex. Zarris will pay $475,000 to address the damage his conduct caused to a lending program overseen by the Department of Housing and Urban Development (HUD). This is the third civil settlement reached in this vital area of civil affirmative enforcement.

“HUD’s reverse mortgage lending program provides critical financial assistance to elderly borrowers in our district,” said Acting U.S. Attorney Muldrow. “This settlement reaffirms our commitment to civil mortgage fraud enforcement.”

“Reverse mortgage” loans provide elderly homeowners with access to the equity in their homes. In general, to be eligible for a reverse mortgage, the youngest homeowner must be at least 62 years old, live in the home as a primary residence, and have sufficient equity in the property.

Reverse mortgages insured by the federal government are called Home Equity Conversion Mortgages (“HECMs”) and are only available through a Federal Housing Administration (“FHA”) approved lender. FHA incentivizes reverse mortgage lending through mortgage insurance. Under FHA’s program, a loan becomes due and payable when the home is sold or vacant for more than 12 months, or upon the death of the homeowner, whichever comes first. The lender is repaid the amount of the loan, including the costs of servicing the loan, and any interest that accrues on lender expenses after a loan becomes due and payable. FHA will reimburse a lender that is unable to recoup the full amount of the loan.

“FHA-backed reverse mortgages are intended to allow elderly homeowners to age in place, not to serve as a vehicle to defraud the federal government,” said Dane Narode, HUD’s Associate General Counsel. “HUD and the Justice Department are working together to protect FHA’s insurance fund and those seniors who depend on reverse mortgages to ease their financial burden.”

From 2008 to 2011, the United States Attorney’s Office and HUD’s Office of Inspector General (“OIG”) investigated Zarris’s practices and concluded that he had improperly obtained the proceeds of federally insured reverse mortgages that, but for his conduct, would not have been underwritten by the lenders. Investigators learned that Zarris had engaged in sales transactions where he concealed the amounts that he had paid to the buyers to artificially inflate the appraised values of condominium complex units. He recruited elderly buyers (over the age of 62) to purchase units at inflated values and, as part of those sales transactions, required them to immediately apply for reverse mortgages in the maximum amount possible. Zarris, or others working with him, would then assist the elderly buyers in applying for reverse mortgages, including filling out their loan applications. The applications submitted on behalf of these buyers failed to disclose certain information that was material to the bank’s decision to underwrite the reverse mortgages. Through these practices, Zarris was able to create the appearance of equity so that the elderly buyers could obtain the reverse mortgages. The proceeds of the mortgages were then wired to a company owned by Zarris at the reverse mortgage closing.


These practices led the FHA program to pay insurance claims on a number of defaulted reverse mortgages, and caused hundreds of thousands of dollars in losses to the United States. The settlement amount is based upon Zarris’s ability to pay and represents a recovery that more than replenishes the amount of the government’s known losses.

“This settlement demonstrates HUD-OIG’s continuing efforts to hold individuals accountable who orchestrate schemes, which victimize America’s seniors through reverse mortgage programs. The United States Department of Housing and Urban Development, Office of Inspector General is deeply committed to collaborating with the Department of Justice to ensure unethical individuals do not manipulate government rules for personal gain,” said Nadine Gurley, Special Agent in Charge, U.S. Department of Housing and Urban Development Office of Inspector General.

The settlement announced today with Zarris follows two other major reverse mortgage claim resolutions reached by the Civil Division in the Middle District of Florida. In September 2015, Walter Investment Management Corporation agreed to pay $29.63 million to resolve allegations that its subsidiary, Reverse Mortgage Solutions, Inc. (“RMS”), had violated federal law by not disclosing its failure to meet mandatory deadlines for obtaining an appraisal of the property within 30 days of the loan becoming due and payable. As a result of failing to disclose its non-compliance, RMS received millions of dollars in debenture interest payments from the FHA that it was not entitled to receive. The investigation of RMS stemmed from the allegations in a whistleblower lawsuit filed by a former executive of RMS.


In May 2017, the Middle District of Florida announced an $89 million settlement with another reverse mortgage servicing company, Financial Freedom. That investigation arose from allegations made by a consultant for the estates of borrowers who took out reverse mortgages. Similar to RMS, the United States alleged that Financial Freedom had claimed payments for interest from the FHA that it was not entitled to receive because it had failed to meet various deadlines relating to appraisal of the property, submission of claims to HUD, and pursuit of foreclosure proceedings.


These investigations have been handled by Assistant U.S. Attorney Kyle S. Cohen and the U.S. Department of Housing and Urban Development’s Office of Inspector General.

The claims resolved by the settlements are allegations only and there has been no determination of liability.

Updated July 20, 2017

Elder Justice
False Claims Act