As more seniors look for ways to add to their retirement incomes, reverse mortgages are becoming more popular. As the number of people interested in reverse mortgages grows, so do the number of cases of fraud and scams involving reverse mortgages. Many older people are finding out that these reverse mortgage scams have cost them tens of thousands of dollars that they had worked hard to save. This type of fraud can hurt your retirement in a big way because reverse mortgages usually involve your biggest asset, which is your home. The following information about reverse mortgage fraud will help you avoid falling for a scam.
Reverse Mortgage Scams
There are different kinds of reverse mortgage scams, and if you fall for one, you could lose thousands or even tens of thousands of dollars worth of equity in your home.
Information about reverse mortgages that costs money
Several companies that help people make plans for their estates have been charging thousands of dollars for information that HUD gives away for free. Most of the time, these companies charge for this information as part of a programme to help people plan their estates. Seniors who sign up for these programmes don't know that these companies make thousands of dollars by charging a fee of 6 to 10 percent of the total amount borrowed. On a $100,000 reverse mortgage, these fees cost the people who are hurt $6,000 to $10,000. HUD recently told lenders who gave out reverse mortgages that were insured by the Federal Housing Administration (FHA) to stop working with these companies.
Trying to get people to use reverse mortgages as a way to pay for things
Some companies that sell expensive goods or services, like annuities or insurance, may try to sell you on the idea that you can pay for them with a reverse mortgage. When the extra cost of the reverse mortgage is added to the purchase, it ends up costing the homeowner much more than the benefit of the product or service.
Reverse mortgage terms that aren't right
Some lenders sneak in extra fees and terms that are too high. These terms can have a big impact on the equity of a Senior. In some cases, lenders have used terms like "shared equity" or "shared appreciation," which give the lender the right to get a portion of the value increase when the home is sold or refinanced. As the value of the home goes up, these kinds of plans can cost tens of thousands of dollars. These rules about rising costs take away equity without giving the homeowner any extra benefits.
How to avoid getting ripped off by reverse mortgage scams
If you are interested in reverse mortgages, there are a few things you can do to make sure you don't fall for one of these scams.
- Get several offers from different lenders who offer reverse mortgages so you can compare the different options. As a general rule, you should get at least three
- Talk to a reverse mortgage counsellor who is approved by HUD. The counsellor will help you figure out what a reverse mortgage is and how it might work for you.
You should get separate offers so that you can compare the terms.
- Make sure you understand all the terms and conditions of the reverse mortgage contracts. You can get help from your reverse mortgage counsellor.
the agreements.
- After you sign the loan agreement, you usually have three business days to back out of it for any reason.
If you think a company is breaking the law, you should tell your reverse mortgage counsellor and then file a complaint with the Federal Trade Commission (FTC) at www.ftc.gov. You can also file a complaint with your state's attorney general's office or banking regulatory agency.
