Mortgage Reverse Scams - What to Look For

Mortgage Reverse Scams - What To Look For

These products are often considered a beneficial and viable option for seniors to access cash on their home without having to worry about monthly loan repayment plans.

Unfortunately, as with many other services, there have been reports of scams for these types of services. Knowing what to look for may help protect your parent's property and educate both seniors and their caregivers regarding reverse mortgage services.

Mortgage Reverse Basics

Mortgage reverse are a type of home loan that enables seniors over 62 years of age or older to convert equity in their home into cash. The loan doesn't need to be paid back as long as the property owner lives in the home. Funds made available through reverse mortgages help many seniors to supplement their social security income, take care of unplanned medical costs and expenses, make improvements to their home, or even take that always dreamed about vacation.

Some of the most popular attractions to the mortgage reverse are that they don't require income qualifications, the homeowner retains title to the home, and no payments are required on the loan until the property is sold, the homeowner dies, or moves out.

reverse mortgage
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Mortgage Reverse Scams

As the old saying goes, " if it's too good to be true", it often is. Seniors as well as their caregivers, family members and friends should know some of the most common scams associated with mortgage reverse offers. Some of the most common include:

  • Charging for information - the Department of Housing and Urban Development provides fact and data sheets services and information regarding reverse mortgages at no cost to consumers.

You may also call HUD at (888) 466-3487. Any company, individual or organization who state that they're estate planners or financial advisers and charge a nominal fee for advice or information regarding a mortgage reverse should be reported to HUD.

  • Less than reputable counseling services - borrowers are required to meet with an HUD-approved reverse mortgage counselor for any FHA reverse mortgage or HECM (home equity conversion mortgage). Approved HUD reverse mortgage counselors ensure that consumers receive the information they need to make knowledgeable and informed decisions. Any counselor who encourages the homeowner to seek specific lending services or products doesn't have the senior's best interests in mind, and should serve as an alarm or red flag.
  • Overpricing repairs - in some cases, senior homeowners may be required to make home repairs before a reverse mortgage negotiation closes. However, seniors and their caregivers, family and friends should be on the lookout for overcharged services. In any such situation, seniors should receive at least three quotes for work suggested by an appraiser, and notify each separate contractor that multiple bids are being gathered. Be extremely cautious of any contractors who demand large upfront payments before services or repairs are rendered.
reverse mortgages
  • Refuse to sign any document that has blank spaces or where the lender or counselor states that information or corrections will be made at a later point in time.According to Consumer Affairs, seniors as well as caregivers and other family members should utilize caution when approaching reverse mortgage providers. Avoid any sales representative who employs high pressure sales tactics or those who encourage loans or annuities that are unwanted.

Because seniors are often prime targets for scam artists and unscrupulous lenders, seniors need to be especially careful when it comes to reverse mortgages. Seniors should be educated and well versed on the terminology and basic structure of a reverse mortgages, and take advantage of HUD approved counseling services.

Protecting Your Investments

Seniors and any caregivers involved in the financial decisions of parents or loved ones should always make sure they know who they're dealing with and the organization they claim to represent.

Ask for identification, their home office location and contact information and verify that the individual you're talking to is who he or she says they are. You may also access HUD-approved law or the National Reverse Mortgage Lenders Association to verify company backgrounds. 

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