Get Away From Reverse Mortgage Scams

With senior's starting to look for ways to supplement their retirement incomes, reverse mortgages are gaining in popularity. And as the interest in reverse mortgages increases, there is a corresponding rise in cases of reverse mortgage fraud and scams. 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. You will find the following information on reverse mortgage fraud useful to escape becoming a victim of a reverse mortgage scam yourself.

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

Thousands of dollars are being charged by several estate planning companies for information provided free from HUD. Typically as part of an estate planning program, these companies charge a price 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. 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

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 looking into reverse mortgages, there are a few 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. You can get help from a counselor in making an evaluation of your situation and in understanding reverse mortgages.

2. Make sure you obtain several offers from different reverse mortgage lenders so that you can 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 understand all the terms and conditions within the reverse mortgage contracts. Your reverse mortgage counselor can guide you through
the contracts.

4. After having signed the loan document, you generally have three business days to cancel it for any reason.

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