A reverse mortgage can be beneficial for older homeowners who have significant equity in their home. Generally speaking, seniors ages 62 and up are eligible to get a reverse mortgage should they meet any additional qualifications. The most common reverse mortgage is the Home Equity Conversion Mortgage (HECM). This is the one that is typically available to most qualifying home owners. It is important for anyone considering a reverse mortgage to be vigilant about possible scammers. Unfortunately, there are many scammers out there trying to take advantage of those seeking a reverse mortgage. This article contains a few common scams that many borrowers encounter when they are looking for a reverse mortgage. Make sure to take a look to ensure that if you come across anything similar, you don’t make the mistake of allowing scammers to take advantage of you.
Avoid claims that mention delaying social security
A fraudster may get a hold of a senior and tell them to take out a reverse mortgage to make up for a gap in their income while delaying their social security benefits. This can have negative consequences. Based on what the Consumer Financial Protection Bureau has found, the Reverse Mortgage costs more than the benefits consumers would receive if they delayed their social security benefits.
House flipping is another common tactic a scammer will use to lure a person in. Essentially what happens, a scam artist will try and convince you to use money received from a reverse mortgage to purchase an old property, fix it up and sell it. The person who is selling this idea will oftentimes try and convince their client that the property is high in value and will continue to increase. This type of scheme usually involves multiple parties such as loan officers and real estate agents. The unfortunate truth is that they often don’t take into regard whether or not the borrower even makes a decent profit.
Any form of mortgage or payment relief
These types of scammers are often targeting lower income senior citizens. They oftentimes will reach out to seniors who are struggling to pay their mortgage or have outstanding medical debt. They start off by advertising messages like “Stop foreclosure” or “100% money back guarantee”. The problem with this is that many times, scammers will make borrowers pay a nonrefundable fee and then end up not even providing services to them. They simply pocket the money leaving the borrower left with unpaid bills.
Any military or veteran reverse mortgages
There are times where a scammer will specifically target veterans or other military families by claiming to offer benefits exclusive to those who served. Something that is important to note, is that the U.S Department of Veterans affair does not back or is even affiliated with any type of reverse mortgage. These false advertisements are simply put in place to pray for older veterans who are looking to reverse their mortgage. Make sure you or your loved ones are aware that these scams exist and be good about avoiding them.
Red flags to look for in wording
Additionally, many scammers will use certain phrases or keywords to get their victims to fall for their scams. Make sure you pay attention to them. Here is a list of some common red flags that tend to occur when a scammer tries to lure in a borrower.
- Business terms used that are overly complex and lack clarity
- Any offer that seems “too good to be true”
- Constant spam messages, emails, text messages containing advertisements
- Generic voicemails
- Being advised to not speak to your current lender or financial advisor
- Having to pay a fee to seek out any additional information
If you are a borrower you should never have to pay to obtain any sort of information. Anytime you check out the Department of Housing and Urban Development’s website, you will always have access to free information.
Ways to protect yourself
Luckily there are steps you can take to reduce your risk of being a victim to a reverse mortgage scam.
- Consult with your financial advisor or real estate attorney
- Speak to family members who you trust and know are well informed
- Make sure you fully understand what you are signing, and if there are additional questions, show the documents to a family member or attorney
- Research your lender and their company by checking their standing on the Better Business Bureau website
- Ignore any phone calls or advertisements that look like they come from sketchy sites
- If you think you are being scammed, contact the HUD’s office hotline at (800)347-3735 to report it