All About Reverse Mortgage Scams

Reverse mortgages can be a fantastic deal for older Americans, or their biggest nightmare. Here are some common reverse mortgage scams to steer clear of.

How would you like a home equity loan that you'd never have to repay as long as you remained in your residence? That's the deal that the United States Department of Housing and Urban Development (HUD) offers Americans age 62 and older. The HUD reverse mortgage program, or Home Equity Conversion Program, was designed to help this older population stay in their homes after retirement. The approved borrower taps into her home equity, and receives monthly payments or a large lump sum.

Many retirees are exploring the reverse mortgage option. For the vast majority of consumers who've taken them, it's a satisfactory way to access extra money. But because eligible seniors can access up to hundreds of thousands of dollars, it's also attracted countless scammers.

Paying for information

The most common type of reverse mortgage fraud is perpetuated by companies who call themselves estate planners, and offer nothing more than information. If a company says that it will help you find a reverse mortgage lender and provide you with basic information about the loans for a fee, run the other way. HUD provides the same facts and services at no charge. HUD is investigating any company that practices this fee-based service. Consumers who have fallen prey to this scam have lost thousands of dollars.

Filling in the blanks

Another common scam occurs when the paperwork that you're asked to sign contains erroneous information or blanks-sometimes even in the loan amount itself. If the lender pressures you to sign documents that have blanks or incorrect information, cancel the deal immediately. Contact HUD about such a company, and find a reputable lender.

Chronic salesmanship

If the company offering you a reverse mortgage also wants to sell you other products such as insurance or annuities, be suspicious. Chances are that you're being scammed into a larger loan with higher fees, and the products that you're buying are also costly and may not be beneficial.

Some companies will also offer home improvements or repairs through a recommended contractor. Most likely, the contractor is aware of the con and charging exorbitant prices for his or her services.

Other victims of reverse mortgage scams report that the lender forged documents or signatures on checks.

Knowledge is saving grace

Con artists count on people's innocence. Arming yourself with as much information as possible, and contacting HUD for lender referrals, are the best means of fending off reverse mortgage scams.

Stay informed and be suspicious of heavy-handed marketing. Reputable lenders won't knock on your door. But finding the right lender and reverse mortgage product through HUD can keep you safe inside your home for many years to come.