FINRA Investor Alert: Reverse Mortgages

Reverse Mortgages: Avoiding a Reversal of Fortune

The Financial Industry Regulatory Authority (FINRA) issued an Investor Alert to help investors make informed decisions on whether or not to take out a reverse mortgage. A reverse mortgage is a loan that is secured by the equity of the borrower’s home. A reverse mortgage converts the equity into cash and the loan is paid off when the borrower dies or moves out and sells his or her home.

Investors should beware of a few things. Firstly, the high interest rates on reverse mortgages and the high fees that often come with a reverse mortgage. Secondly, the interest rates though are not payable as long as you live in your home and you don’t sell your home, but they are still compounding for as long as you have the reverse mortgage and as you age, you may not be as alert to the interest that is due on top of the loan should you decide to downsize your home.

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FINRA Press Release: Disclosure of Wells Notices

Goldman Sachs to Pay $650,000 for Failing to Disclose Wells Notices

The Financial Industry Regulatory Authority (FINRA) issued a press release today announcing that 

it has fined Goldman, Sachs & Co. $650,000 for failing to disclose that two of its registered representatives, including Fabrice Tourre, had received formal notices from the Securities and Exchange Commission (SEC) that they were the subjects of investigations. Tourre's "Wells Notice" was issued in connection with the SEC's investigation of an offering of a synthetic collateralized debt obligation (CDO) called ABACUS 2007-ACI (Abacus).

The settlement is detailed in the FINRA AWC No. 20100224738-01.

A Wells Notice is given by FINRA to individuals or firms to inform them of FINRA’s intention to bring charges and disciplinary action against them. FINRA has rules that require the individuals or firms to update their regulatory record within 30 days of receiving a Wells Notice. FINRA claims that Tourre did not update its regulatory record within 30 days of receiving his Wells notice. Furthermore, FINRA claims that Goldman did not provide proper supervision to ensure that, when its individual employees are subject to regulatory investigation and subsequent reporting requirements, it is properly informed of both the investigation and the requirements.