Avoiding Reverse Mortgage Scams

As reverse mortgages become more popular, more and more cases of reverse mortgage fraud are popping up. Since reverse mortgages typically involve your largest asset (your home), you will want to make sure that you do not fall victim to one of these scams.

Reverse Mortgage Scams

Getting charged for free information: Some companies have been charging thousands of dollars for information provided free from HUD. Typically these companies charge for this information as part of estate planning services. Seniors signing up with these contracts are unaware of that these firms are charging a fee of 6 to 10 percent of the total amount borrowed. These fees can run into the tens of thousands. HUD has 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 large purchases: Some companies will try to suggest using a reverse mortgage to purchase the items they are selling, like annuities or insurance.

Unethical reverse mortgage terms: Some reverse mortgage lenders will slip excessive fees and terms into their contracts. These can have a devestating effect a Seniors equity. In some cases lenders have used shared equity or shared appreciation terms. These fees cost homeowners equity without providing any benefit to the senior homeowner.

Protecting Yourself

What can you do to protect yourself from reverse mortgage scams?

The best way to protect yourself is to use a HUD approved reverse mortgage counselor to evaluate your situation and potential reverse mortgage contracts. The will alert you to any potential problems.

If you suspect that a compay is violating 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.

Resource: Brought to you by Reverse Mortgage and the Reverse Mortgage Blog.