Reverse mortgages are gaining in popularity as more seniors start searching for ways to add to their retirement incomes. And as the interest in reverse mortgages rise, so are the cases of reverse mortgage fraud and scams. Many seniors are discovering that they have lost thousands dollars of their hard earned equity to these reverse mortgages scams. Because reverse mortgages usually involve our largest asset (your home), this type of fraud can have a significant negative impact on your retirement. The following reverse mortgage fraud information will assist you to avoid becoming a victim of a reverse mortgage scam.
Reverse Mortgage Scams
There are a number of types of reverse mortgage scams that can end up costing you thousands as well as tens of thousands of dollars in equity in your home if you become a victim.
Charging for free info on reverse mortgages
Several estate planning companies have been charging thousands of dollars for information provided free from HUD. Typically these companies charge for this information included in an estate planning program. Seniors who 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 overall 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
Several companies that sell large ticket items or services, such as annuities or insurance products, may try to suggest using a reverse mortgage as a way to fund these purchases. When the additional cost of the reverse mortgage is factored into the purchase, it ends up costing the homeowner much more than the benefit provided by the product or service.
Unethical reverse mortgage terms
Some lenders slip in excessive fees and terms into their contracts. These terms can have a serious effect in a Senior's equity. In some instances, 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 while the home appreciates. These increasing cost provisions eat up equity without offering any additional benefit to the homeowner.
Protecting yourself from reverse mortgage scams
If you're considering reverse mortgages, you will find a number of things that you simply can do to protect yourself from falling victim to these kinds of scams.
1. Talk to a HUD approved reverse mortgage counselor. The counselor will help you comprehend reverse mortgages and assist you to evaluate your situation.
2. Acquire several offers from various reverse mortgage lenders to be able 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 comprehend all the terms and conditions within the reverse mortgage contracts. Your reverse mortgage counselor can direct you through the contracts.
4. You usually have 3 business days after signing the loan document to cancel it for any reason.
If you suspect that a company is running 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.
Reverse Mortgages Explained
