Reverse mortgage scams

The procedure and possibility of accessing Home Equity Conversion (HECM) loans is not as stringent as that of acquiring a traditional mortgage.  Proof of the requisite age (62) and a basic verification offered are sufficient to qualify. 

This may be good or bad, and especially so due to the many reverse mortgage scams that have been visited on borrowers.  Tim Paul in his article “five reverse home mortgage scams to watch out for” single out some reasons for such scams as follows:

• reverse mortgages are products specifically designed for and targeted to senior citizens, the population group most vulnerable to fraud;
• scam artists know that a reverse mortgages provide the senior homeowner with relatively easy access to a sizeable pool of cash; and
• reverse mortgages are harder to understand than traditional mortgages making it easier for the scam artist to confuse and take advantage of victims.

Issuance of reverse mortgage information

Since the introduction of reverse mortgages, many bogus counselors have arisen.  They charge extreme fees to offer advice that may be, in fact, untrue. The Department of Housing and Urban Development (HUD) issued a directive to prevent senior citizens from being charged thousands of dollars each for information about HUD's re-verse mortgage program. 

HUD’s Secretary said HUD provides access to the same type of information on reverse mortgages free of charge through an information line: (888) 466-3487.  Firms offering loans are nowadays couching such expensive advice in words such as “estate planning services”.  Some of this expensive information does not actually help and it is therefore prudent for an applicant to roll up his/her sleeves.

Reverse mortgage scams clothed as Government of Non profit making

The most popular form of reverse mortgage, HECM is an official program HUD but neither HECM nor other reverse mortgage packages are marketed directly to senior homeowners by government employees.

It is therefore important not to believe every salesperson that represents himself or herself as a government representative or volunteer for NGO’s.

Forgery and counterfeiting

From Detroit to California, New York to every other State, forgery of reverse mortgage documents, especially by brokers, is rampant.  As a senior, you may want to look out for these “innocent mistakes” that are on your reverse mortgage documents and they include signatures and missing or extra digits on the amount to be borrowed.  These could be fakes.

Combining Reverse mortgages with other instruments

Prudence will require that if you have to get a reverse mortgage, then separate it from any other borrowing that you want to undertake, even if so similar in nature.  This will give you the chance to be more analytical and to prevent the possibility of miscalculating the overall cost of the deal.

Reverse mortgages are always bundled with a other financial instruments including annuities, car loans and even pyramid schemes.

Educate yourself on reverse mortgages and related scams

An educated consumer will scare off potential fraudsters.  Take advantage of counseling that is offered by all the three kinds of reverse mortgages (HUD HECM, Fannie Mae’s Home Keeper and Financial Freedom).

References

• http://EzineArticles.com/?expert=Tim_Paul
• http://www.mortgagealmanac.com/articles/97-consalrevmtgescams.html - Michael Licamele
• http://www.consumeraffairs.com/news04/2008/01/fl_reverse_mortgage.html