Many people now consider it normal to be on the lookout for Internet scams and other forms of fraud, yet scams are nevertheless successfully carried out every day. One explanation is that fraudsters are more clever than ever and more selective in who they chose as their targets.
Older adults are one demographic that con artists seek to target because they think they will be slower than younger individuals to recognize a potentially detrimental plan. Reverse mortgage scams have become more common in recent years as more homeowners over the age of 65 have chosen to use them.
- Scammers often use different investment and mortgage schemes to target elderly victims.
- People over the age of 62 have access to an instrument called a home equity conversion mortgage (HECM), which may be useful in retirement.
- It enables house owners to take out loans, the size of which normally relies on the value of the home, the homeowner’s age, and the amount of equity in the property.
- Fake house value assessments or incorrect loan documentation are common components of scams.
- Seniors thinking about a reverse mortgage should start by visiting the HUD website and speaking with a reverse mortgage consultant.
The FHA’s reverse mortgage program, known as the Home Equity Conversion Mortgage (HECM), is open to homeowners aged 62 and over and may be a useful financial tool for retired persons who want to access their home equity and generate income. Homeowners who engage with a reputable lender for a reverse mortgage will be required to attend financial counseling to make sure they comprehend the loan and how it works.
Nevertheless, be cautious of the possible frauds listed below if you are thinking about using a reverse mortgage as a retirement aid.
1. Foreclosure Scams
Sometimes criminals target elderly victims whose houses are at risk of foreclosure. Using a dishonest assessor, they falsely increase the home’s worth so that they may later use it as collateral for a reverse mortgage. The fraudsters have the victim transfer the title to them once the mortgage is approved, leaving the victim without a property and without the money from the reverse mortgage.
Working with a fictitious financial organization to tell senior property owners that they do not meet the requirements for a reverse mortgage but are still eligible for another sort of loan is another method of deceiving them. The homeowners’ ownership of the property will be transferred at the closing.
2. Equity Theft Scams
Multiple people sometimes join forces in intricate equity theft scams in order to purchase a bank-owned home or a foreclosure. They then hire an elderly person to buy the home back and take out a reverse mortgage on it after getting an exaggerated assessment.
The settlement “attorney” for the reverse mortgage often participates in the fraud as well. When the reverse mortgage is settled, these people disappear with the money, leaving the elderly person with little to no equity and no cash.
3. Free Homes
Scammers and scam artists utilize advertising to find elderly residents for a house in order to get a reverse mortgage on it. The elderly individual covers the cost of the home’s insurance and property taxes while the con artists take the reverse mortgage income.
The reverse mortgage is often acquired using a fictitious, exaggerated assessed value. Due to the absence of actual value in the house, the reverse mortgage lender is left holding the bag whenever the elderly individual dies away or moves.
4. Document Fraud
A “Reconveyance Deed” is one of the loan papers that some scam artists simply write letters to elderly people about, asking for money to deliver copies of the deed. The lender should have a copy of this document on file.
For information regarding a reverse mortgage, which can be obtained for free from the Department of Housing and Urban Development, other con artists charge elderly individuals money—up to thousands of dollars—in exchange (HUD).
5. Investment Scams
Some con artists aim to persuade their victims to “invest” in an annuity or real estate fund connected to reverse mortgages. When the scam artist, who is often someone connected to a rogue reverse mortgage lender, escapes with the money, the victims will lose the money they invested.
Tips for Avoiding Scams
Seniors who are interested in learning more about reverse mortgage possibilities may start by visiting the HUD website. It includes a link to locate a HUD-approved HECM counselor as well as an explanation of the fundamentals of these loans. The website of the National Council on Aging is another option to consider. Additionally, homeowners may get a free brochure regarding reverse mortgages from the National Council on Aging.
Proceeds from a reverse mortgage may be obtained in the form of a flat amount, regular installments, or a line of credit. The amount to be borrowed is determined by the ages of the homeowners, the value of the house, and the amount of equity that is accessible. If the homeowner dies away or the house is sold, the debt must be returned. After the loan has been repaid, any remaining home equity is distributed to the homeowners or their heirs.
A reverse mortgage cannot be used to evict homeowners from their houses. They are still required to maintain the property, pay the property taxes, and get homeowners insurance.
The FBI has a few other tips and suggestions:
- Responding to unwanted adverts is not advised.
- Anyone who says you can purchase a property with no down payment should be taken very seriously.
- Anything that you do not completely understand, do not sign.
- Find a knowledgeable reverse mortgage consultant.
Additionally, keep in mind that not everyone will be able to recognize these frauds. Scammers with reverse mortgages target elderly persons with disability particularly. You may assist to safeguard kids by alerting authorities to such frauds.
Finally, be aware that if you believe someone has cheated you or your family, you do not necessarily need to engage an expensive lawyer. The police may be able to retrieve the money if you call them quickly enough.
Fraudulent reverse mortgages are forbidden. There are actions you may take if you think fraudsters targeted you because of your age, handicap, military service, race, religion, sex, marital status, usage of government aid, national origin, or other characteristics. Making a report to the Consumer Financial Protection Bureau or the U.S. Department of Housing and Urban Development is one of these steps (HUD).
The Bottom Line
For elderly persons and their families, a reverse mortgage may be a useful financial instrument if frauds are avoided and accurate information about them is obtained. Like with any mortgage, you should do your research and speak with the proper experts before signing on the signed line. If not, you run the danger of being taken advantage of by vultures.
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