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A reverse mortgage scam occurs when perpetrators blatantly mislead a senior to take out a lump sum payment on a home’s equity to pay for a bunch of fictional items, costly repairs they don’t need, reverse mortgage counseling fees, attractive insurance policies and investments and feeder fee annuities from their fraudulent company and later these fraudsters disappear with the money and the senior is left with no cash or equity in their home. This results to various challenges such as eviction and poverty due to unpaid loan recovery and much more.
The two most common reverse mortgage scams are the equity theft and foreclosure rescue. In an equity scam , the fraudster purchases a house that is in a foreclosure or distressed/abandoned, sells it to a senior citizen who takes out a reverse mortgage after occupying the property for sixty days and once the transaction goes through perpetrator disappears with the proceeds. In the foreclosure rescue scam, the perpetrator identifies seniors who are at a risk of losing their homes due to foreclosure, convince them to obtain a reverse mortgage to save the property but will then inform the senior that he /she does not qualify. They encourage him to take a traditional mortgage at which point the property and its equity will be transferred to the fraudster.
However it is possible for a person to be able to avoid being a victim of reverse mortgage scams and misfortunes. This is possible through a number of ways listed below .these are:
- Every person should not wait until they are desperate for a mortgage that means you should avoid making financial decisions under stress as this limits the options that you would have to choose from.
- Always compare the offers in the market to be on the safer side and check the reputation of those offering them with the Better business bureau.
- Avoid those lenders who offer both a mortgage and investments too but rather choose a financial planner, financial officer or an asset manager for investments and in every uncertain investment apply the rule of thumb.
- Always consult more than one lender to clarify if a repair suggested by any one lender really exist or it’s just a fraud.
- Always consult a third party before signing papers offered to you if you do not know why you are signing them.
- Attend the closing of any deal in person to avoid any unknown changes to you on the terms and conditions.
- Always be suspicious of anyone telling you that you can own a house without a down payment.
- Do not accept payment from individuals for home you did not purchase.
- Do not respond to unsolicited advertisements.
In case it has happened or happens to you it’s always good to come out and report to the authorities who may help you recover the personal loses and you may be in a position to save other seniors from suffering the same fate and help them avoid reverse mortgage scams.