Mortgage Loan Fraud Investigation

Investigators in a joint DISB and Federal Bureau of Investigation are probing a group of individuals who used stolen, personal identities to obtain loans to purchase and later “flip” five District properties. The efforts are being coordinated with the supporting Assistant US Attorney to develop evidence and identify additional subjects for a criminal prosecution.

AIG Policyholders Should Be Careful if Approached to Replace Policies

American International Group (AIG)’s insurance companies are financially sound, with substantially more assets than they need to pay all valid present and projected claims, DISB Commissioner Thomas E. Hampton reassured District policyholders mid-September. He warned policyholders about making brash decisions if they have policies issued by an AIG insurance company, adding that all covered claims will be paid and all annuity checks will come. AIG, the largest writer of property and casualty insurance business in the District, received a federal bailout of an $85 billion credit facility. The issues with AIG were not related to its insurance activity and the 41 AIG insurers licensed in DC are financially solvent. It is anticipated that the certain of these insurers will be sold over the next two years.

Commissioner Hampton explained that the bankruptcy trouble with AIG is largely with AIG’s non-insurance parent company, which is not regulated by the states and therefore not held to the same investment, accounting and capital adequacy standards as its state-regulated insurance subsidiaries. The insurance subsidiaries are solvent and able to pay their obligations.

Equity Indexed Annuities

The Securities and Exchange Commission (SEC) proposed new rules to clarify the status of Equity Indexed Annuities under the federal securities laws. The rule would prospectively define certain indexed annuities as not being “annuity contracts” or “optional annuity contracts” under the insurance exemption in the Securities act of 1933 if the amounts payable by the insurer under the contract are more likely than not to exceed the amounts guaranteed under the contract. DISB is reviewing the proposed rules and may submit comments to the SEC regarding the rules.

DISB Recovers Insurance Claim

DISB recently recovered an almost-$5,000 insurance claim for a District resident. The person’s insurance company had denied coverage for damage to the resident’s condominium. After an analysis by DISB staff, the agency concluded that the company improperly denied the claim because the policy provisions did not exclude coverage as asserted by the insurance company. DISB notified the insurer, the claim was re-opened and DISB has been advised by the insurance company that it will cover the damage.

 For District residents seeking help with insurance claims or other financial-related claims, please call DISB at (202) 727-8000 or visit our website at disb.dc.gov and fill out a complaint form.

DISB in the Community

The Money Bus Tour Commissioner Thomas E. Hampton (center) is flanked by (L-R) Michael Joyce, president of the board of trustees for the NAPFA Consumer Education Foundation and Knight Kiplinger, editor of Kiplinger’s Personal Finance magazine. They hosted the kickoff for the Your Money Bus Tour in Washington, DC, on October 1. The bus spent several hours near the grounds of the National Museum of the American Indian at the National Mall. During the next year, the bus will visit various cities around the country where the public will be able to get free financial advice and information.

Elderfest DISB was at the annual DC Office on Aging’s Elderfest celebration at Freedom Plaza early September. Staff handed out information about the agency’s consumer protection services for seniors. Additionally, DISB’s financial fraud investigators were available to advise the public of the newest financial frauds in the District and provided instructions on how to report them. DISB staff: Sitting: (L-R) Betty M. Bates, Yvonne Henderson, LuCynthia Jordan and Michelle Mathis. Standing: (L-R) Marionnetta Dickens and Tracey Robinson.

Upcoming Events Consumer Outreach Presentation—Wednesday, October 22, 2008, 2:30 pm to 3:30 pm, Channel Inn, 650 Water Street, SW.  DISB staff will address the DC Metropolitan Association of Housing Counselors at its 32nd Annual Training Conference on subprime lending and mortgage default prevention. Career Fair: Southeastern University’s Job Fair—Wednesday, October 22, 2008, 3 pm to 7 pm, Southeastern University, 501 I Street, SW. DISB staff will be on hand to give information about the agency, as well as about various job vacancies. Presentation: AARP-DC, Penn Branch Chapter 3473—Monday, October 27, 2008, 11:45 am – 1 pm, Pennsylvania Avenue Baptist Church, 3000 Pennsylvania Avenue, SE. DISB’s Consumer Protection Advocate will address seniors about the types of consumer protection and education actions that DISB uses to assist the District’s seniors. AARP is the sponsor of this event. Forum: DISB’s Leadership Forum on Subprime Lending and Mortgage Default Prevention—Tuesday, October 28, 2008, 6:30 pm – 8:30 pm, Festival Center, 1640 Columbia Road, NW. DISB’s Consumer Protection Advocate will join other key Ward 1 leaders to address the leadership about taking the message about subprime lending and preventing mortgage defaults back to their constituents. Co-sponsored by DISB, CentroNia, MiCasa Inc., Latino Economic Development Corporation and the Greater Washington Federation of Latino Organizations. Expo: For Sisters Only—Saturday, November 1, 2008, 11 am – 8 pm, Walter E. Washington Convention Center, 801 Mt. Vernon Place, NW. DISB will take part in this 10th annual expo event by handing out information on the agency’s financial literacy services, specifically for women and their families. Sponsored by WPGC 95.5 FM. For additional updates, select the agency calendar on disb.dc.gov.

DISB Cautions Investors Against Making Sudden Decisions Amid Wall Street Crisis

DISB cautioned DC investors early October against making sudden and uninformed decisions amid the ongoing market volatility and unprecedented turmoil on Wall Street. DISB Commissioner Thomas E. Hampton reminded investors about the important safeguards protecting their brokerage account assets. The current headlines prey on the worries and fears of investors, and DISB is concerned about scammers gearing up to promote various schemes with promises of big returns.

DISB provided the following tips for investors:

• Contact DISB at (202) 727 8000, and ask for the Securities Bureau with any questions about an investment firm, professional or product. Make sure that both the seller and investment are licensed and registered. If they are not, they may be operating illegally.
• Use common sense. Some things really are too good to be true. Get a professional, trusted third-party opinion when presented with investment opportunities that seem to offer unusually high returns in comparison to other investment options.
• Request written information that fully explains the investment, such as a prospectus or offering circular. The documentation should contain enough clear and accurate information to allow you or your financial adviser to evaluate and verify the particulars of the investment.
• If you participate in an employer-sponsored retirement plan, such as a 401(k) plan, get unbiased advice and guidance before making any significant changes to your long-term savings and investment strategy.

DISB to Mark Health Insurance Awareness Month

For a second time in a row, DISB will use the month of November to mark the District’s Health Insurance Awareness Month. Health insurance helps people receive timely medical care that improves their health and their lives. Overall, people who are uninsured receive about half as much care as the insured. The agency will use this month, which coincides with the District government’s open enrollment period, to bring attention to the need for health insurance. Although the District fares relatively well in terms of health coverage for its residents, about one in 10 is still without health coverage, according to data by the DC Department of Health. DISB will host an event for government employees interested in finding out more about the types of coverage the government offers. Also, residents may visit healthinsurance.dc.gov, a one-stop resource that can help residents find health care coverage appropriate for them. DISB worked with the Department of Health and the Office of the Chief Technology Office to launch the Web portal in 2007.

New Report Released to Assist Financial Services in Serving Older Investors

As part of the Securities and Exchange Commission’s third annual Seniors Summit held in Washington, DC, September 22, the staff of the SEC along with the Financial Industry Regulatory Authority (FINRA) and the North American Securities Administrators Association (NASAA) released a joint report outlining practices that financial-service firms can use to strengthen their policies and procedures for serving older investors as they approach and enter retirement. Projections show that nearly one in every six Americans will be age 65 or older by the year 2020. Given the increasing number of investors who need advice and guidance, financial-service firms are actively developing new products and increasingly providing financial advice and services to senior investors. The regulators join DISB in viewing that the protection of senior investors is a top priority. The regulators’ joint report, Protecting Senior Investors: Compliance, Supervisory and Other Practices Used by Financial Services Firms in Serving Investors, provides practical examples of proactive steps being taken financial-services firms in serving senior investors.

The report summarizes firms’ practices in the following areas:

• Getting started: how firms are thinking of ways to remodel their supervisory and compliance structures to meet the changing needs of senior investors.
• Communicating effectively with senior investors.
• Training and educating firm employees on senior-specific issues (such as how to identify signs of diminished capacity and elder abuse).
• Establishing an internal process for escalating issues and taking next steps.
• Encouraging investors of all ages to prepare for the future.
• Advertising and marketing to senior investors.
• Obtaining information at account opening.
• Ensuring the appropriateness of investments.
• Conducting senior-focused supervision, surveillance and compliance reviews.

Regulators hope to provide practical examples to assist firms in ensuring that they work with senior investors in an ethical, respectful and informed manner. The summit also included discussions about how securities firms and professionals can detect signs of diminishing capacity of a senior investor and what steps to take; what will get securities professionals into trouble with regulators and enforcement officials; and new surveillance techniques to make sure firms are in compliance with the law.

DISB Warns of Email Claiming to be From the FDIC

DISB Commissioner Thomas E. Hampton recently warned District consumers to be concerned about a fraudulent email that has the appearance of being sent from the Federal Deposit Insurance Corporation (FDIC). The subject of the email states, “Funds wired into your account are stolen.” It tells recipients that the proceeds of identity theft crimes have been wire-transferred into their bank account; the email then directs recipients to open and review an attached copy of their bank account statement. The attached file is actually an unknown executable file. DISB is warning recipients that this file is a malicious attempt to collect personal or confidential information, some of which may be used to gain unauthorized access to on-line banking services or to conduct identity theft.

Please be advised that the FDIC does not issue unsolicited e-mails to consumers. Financial institutions and consumers should NOT open the executable file attached to the fraudulent e-mail. You may report suspicious e-mails regarding the FDIC by sending an email to the FDIC financial crimes unit at alert@fdic.gov or call the FDIC toll-free at 1 (877) ASK-FDIC (1 (877) 275-3342). If you have been a victim of the above scam and would like to file a complaint, please contact DISB at (202) 727-8000 or visit our Web site at disb.dc.gov.