Reverse mortgage scammers are most certainly wolves in sheep’s clothing. Sadly, they are perceived as trusted advisors therefore senior citizens will come to them for help to make the big reverse mortgage decision. In many cases the loan may NOT be right for them. The scam artist will knowingly take advantage of people and convince them to sign up for a product that they aren’t eligible for or cannot afford. In the worst case the scenario they will steal the proceeds, leaving the borrower with the new debt on their home, or without a home at all.
Reverse mortgage borrowers should become familiar with common scams, and how to identify them. Reverse mortgages can be hard to understand, so we should do our best to educate ourselves on the risks and rewards, because someone’s financial well being is at stake. There are a few such schemes, but well start with We’ll start with vendor and contractor fraud.
This scam occurs when a contractor or a vendor recommends that the homeowner pay for their home repairs with a reverse mortgage. The fraudsters focus on the elderly, in an attempt to sell them repairs, or perhaps remodeling project, or some other kind of home improvement project. When the homeowner asks how they’ll pay for such expensive services, the sketch artist has a quick answer: take out a reverse mortgage. What the scammer doesn’t tell the homeowner is that a reverse mortgage is a tremendous undertaking, and can be a costly one, too. It requires counseling, and when someone who isn’t in the mortgage business (a contractor, for example) instructs a senior to take out a reverse mortgage loan to pay for repairs, it should definitely be cause for alarm. Because a contractor would not know if a reverse mortgage is right for a certain homeowner, it is likely that they are acting out of greed based motives.
If the homeowner has actual repairs that need to be done, it’s not necessary that they get a reverse mortgage. There are much cheaper options available, such as a home equity loan or a home equity line of credit, which are far less consequential. Please remember that to figure out whether a reverse mortgage is a good idea for someone often takes many hours of counseling and planning, and shouldn’t be jumped into.
Another scam akin to the first mentioned, is quite sinister Instead of home improvement, a financial advisor might want to sell an elderly person some kind of financial product that they don’t really need, encouraging them to pay for it through the use of a reverse mortgage. Like the example of a contractor recommending a senior pay for repairs or a remodel with a reverse mortgage, the financial advisor is using deceptive fraud based practices by suggesting taking out a reverse mortgage loan to pay for stocks, annuities, or whole life insurance. Such crooks are running the risk of jail time. Buyer beware when dealing with such pushy people! Consult only with professionals when considering reverse mortgages.