Avoid reverse mortgage scams

As more senior’s are looking for ways to supplement their retirement incomes, reverse mortgages are becoming popular. And cases of reverse mortgage fraud and scams increases with a rise in the interest in reverse mortgages. Many seniors are finding that they have lost thousands dollars of their hard earned equity to these reverse mortgages scams. Since reverse mortgages typically involve our largest asset (your home), this type of fraud can have a serious negative impact on your retirement. The following reverse mortgage fraud information will be of help if you do not want to become a victim yourself of a reverse mortgage scam.

Reverse Mortgage Scams

The are several types of reverse mortgage scams that can end up costing you thousands and even tens of thousands of dollars in equity in your home if you become a victim.

Charging for free information on reverse mortgages

Several estate planning companies have been charging thousands of dollars for information provided free from HUD. Typically as part of an estate planning program, these companies claim a charge for this information. Seniors that sign up for these programs are unaware that these firms are collecting thousands of dollars by charging a fee of 6 to 10 percent of the total amount borrowed. These fees costs the victims $6,000 to $10,000 on a $100,000 reverse mortgage. HUD has recently issued a directive to lenders that issued reverse mortgages insured by the Federal Housing Administration (FHA) to stop doing business with these companies.

Pushing reverse mortgages as a way to pay for purchases

Often times people that sell more expensive items or services, such as annuities or insurance policies will suggest getting a reverse mortgage to pay them. With the additional cost of the reverse mortgage, the total cost for the products or services will increase greatly, so that the benefits of the products are much less.

Unethical reverse mortgage terms

Mortgage companies might try to charge additional fees during the closing or change the terms of the mortgage documents. These terms can have a serious effect a Seniors equity. In some cases, lenders have used shared equity or shared appreciation terms, which gives the lender the right to collect a portion of the appreciation when the home is sold or refinanced. The cost of these type provisions can run into the tens of thousands as the home appreciates. These rising cost provisions eat up equity without providing any additional benefit to the homeowner.

Protecting yourself from reverse mortgage scams

If you are considering getting a reverse mortgage, there are several things that you can do to protect yourself from falling victim to these types of scams.

1. Speak with a HUD approved reverse mortgage counselor. The counselor will help you understand reverse mortgages and in evaluating your situation.

2. Obtain several offers from different reverse mortgage lenders in order to compare different options. The rule of thumb is to get at least three
separate offers so that you have a good comparison of the terms offered.

3. Make sure you are fully aware of all the terms and conditions specified in the reverse mortgage contracts. Your reverse mortgage counselor can guide you through
the contracts.

4. It is usually three business days whithin which you can cancel your loan agreement for any reason after signing it.

If you think that a lender is doing something that is in violation of the law, let your reverse mortgage counselor know and then file a complaint with your State Attorney General’s office or banking regulatory agency and the Federal Trade Commission (FTC) at www.ftc.gov.

This article is supported by the mortgage forum, Tucson mortgage , and Irvine mortgage