Senior Citizens Should Be Wary of Reverse Mortgage Scams
Florida Attorney General Bill McCollum is warning senior citizens about scams involving reverse mortgages, a type of home equity loan frequently abused by con artists and scammers.
These loans are often popular options for senior citizens because they offer a cash source which can help meet unexpected medical expenses, supplement Social Security and more.
"When our senior citizens are concerned about finances and are seeking a legitimate option for financial relief, they should not have to worry about predatory lenders or brokers trying to capitalize on their precarious position," said Attorney General McCollum. "Consumers should take every precaution to avoid scams and situations which could leave them in even worse financial shape."
Reverse mortgages are a special type of home loan that allow homeowners who are 62 and older to borrow against their home equity without having to repay the money until the home is sold or the borrower passes away or moves out permanently.
When the home is sold, lenders recover their principal plus interest. The remaining value of the home goes to the homeowner or to his or her survivors.
Unfortunately, as the popularity of reverse mortgages grows, so does the potential for fraud. Predatory lenders, unscrupulous loan agents and dishonest brokers may target senior citizens who may be anxious about their financial security.
Deceptive practices and allegations of high-pressure sales tactics are being more frequently encountered as senior citizens are being taken advantage of under the guise of a helpful and legitimate reverse mortgage. Borrowers also run the risk of being steered into inappropriate loans and annuities by sales agents and insurance brokers who could be working together without disclosing that relationship to the borrower.
McCollum noted that reverse mortgages can serve a purpose when financed through legitimate lenders.
According to the U.S. Department of Housing and Urban Development (HUD), homeowners who take out a reverse mortgage can receive payments in a lump sum, on a monthly basis, or on an occasional basis as a line of credit. Homeowners whose circumstances change can restructure their payment options.
HUD-approved housing counseling agencies are available for free, or at minimal cost, to provide information, counseling, and free referral to a list of HUD-approved lenders. HUD does not recommend using an estate planning service or any service that charges a fee just for referring a borrower to a lender.