Seniors: Be Aware of Reverse Mortgage Scams

4/28/2007

posted by N. Sioris

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Seniors need to be aware that even though the vast majority of the people working in the Reverse Mortgage field are reputable, there are a few that are not completely honorable. A few things that the senior should be aware of are:

Encouraging Reverse Mortgages So That Seniors Can Buy Other Investments
Some companies that are selling expensive insurance products or annuities, may suggest using reverse mortgage proceeds to fund the purchase of these products. Be aware that the commissions paid to sell these products are quite large. There is a lot of incentive on the part of the sales person to find a senior that has access to a large lump sum of money to invest in an annuity or a life insurance product. Seniors should know that a reverse mortgage itself can be a form of an annuity, if the homeowner chooses the tenure option. Additionally, if a senior does purchase one of these insurance products with reverse mortgage loan proceeds, they need to factor in the cost of obtaining the reverse mortgage plus the cost of the insurance purchase. Often times the combined costs will be greater than the benefit provided by the annuity or insurance product.

Charging For Information That Is All Ready Free
There are some that are charging for information that is all ready available for free, such as recommending a lender. Beware of estate planning companies that charge for information that HUD provides for free. HUD does not recommend using an estate planning service, or any service that charges a fee just for referring a borrower to a lender. HUD provides this information without cost, and HUD approved reverse mortgage counseling agencies are also available for free.

If you are looking into reverse mortgages, there are several 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. The counselor will help you understand reverse mortgages and help you evaluate your situation.

2. Obtain several offers from different reverse mortgage lenders in order 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 understand all the terms and conditions within the reverse mortgage contracts. Your reverse mortgage counselor can guide you through the contracts.

4. You generally have three business days after signing the loan document to cancel it for any reason.

If you suspect that a company is operating 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.
Locate A HUD Approved Reverse Mortgage Lender Near You.