What are the most common reverse mortgage frauds and scams?
Reverse mortgages are becoming quite popular in the present times. However, you need to be at least 62 years of age in order to obtain a reverse mortgage loan. It allows a homeowner to convert the home equity into accessible cash, which can be used for a variety of purposes, such as, making home improvements, meeting sudden medical expense, etc. However, while taking out such loans, you need to be aware of reverse mortgage frauds and scams so that you can avoid them.
5 Common reverse mortgage frauds and scams
Here are 5 common reverse mortgage frauds and scams that you need to be aware of while taking out the loan.
1. Downplay pre-loan counseling: It is mandatory to attend a pre-counseling session before taking out a reverse mortgage loan. However, there are some dishonest companies that downplay the importance of pre-counseling. What actually happens is that the scam artists don’t tell you how much you’re eligible for in order to pocket out the difference. Though telephonic pre-counseling is allowed, yet it is recommended that you attend a face-to-face meeting with a trained counselor.
2. Pay for relevant information: Since reverse mortgage is a much more complicated process than any other mortgage loans, some con artists may ask a fee in order to provide you with the relevant information. Most of the times, the fraudulent companies ask for a percentage of the loan amount. However, as per HUD (US Department of Housing and Development) rules, you’re eligible to attend a reverse mortgage counseling at absolutely free of cost.
3. Signature forgery: It is one of the most common reverse mortgage frauds and scams. The lender may request the title company to prepare 2 checks for the homeowner. Amongst these 2 checks, the homeowner receives one and the lender endorses forged signature into the other one and deposits the amount into his/her own account. It may also happen that the lender asks you to sign a blank document and fills out the blanks later. Make sure not to sign a document with blank spaces; always ask the lender to fill out the blanks before you sign any mortgage related document.
4. Sell products with reverse mortgage: Suspect if any company tries to sell other financial products (such as, annuities, insurance policies, etc.) along with the reverse mortgage loan. It may happen that you’re actually being scammed into a much higher loan with comparatively higher fees. Therefore, avoid purchasing the products (that are offered with your reverse mortgage loan) if you don’t require them.
5. Pose as government or non-profit organization: HECM (Home Equity Conversion Mortgage) is the only reverse mortgage program that is insured by the US Federal Government. However, this program is not marketed directly to the senior homeowners. Therefore, beware of lenders who pose themselves as government representatives or volunteers of non-profit organizations in order to market reverse mortgage loans.
You can take some precautions while looking for reverse mortgage loans. First of all, do not ever respond to unsolicited advertisements and don’t sign any document without understanding its legal consequences. Apart from this, educate yourself on reverse mortgage and attend a counseling session with a trained reverse mortgage counselor. It will help you to prevent yourself from becoming a victim of reverse mortgage frauds and scams.
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