4 Reverse Mortgage scams and how to avoid them
Reverse mortgages are widely popular among seniors aged 62 and above as it provides them with a steady cash flow of tax free income in his retirement years. However, with the rising popularity of these loans, there has been a steady rise in reverse mortgage scams and frauds.
There are 4 types of reverse mortgage scams as given below:
Downplay loan counseling:Popular reverse mortgage products such as the HECM, Fannie Mae’s Home Keeper etc require borrowers to go through loan counseling with an experienced reverse mortgage counselor prior to taking out the loan. But there are predatory lenders who do not disclose how much seniors can borrow and thus offer them more than they can afford. And this may lead to payment problems as the borrower may have problems repaying the loan. Here’s where a counseling session can help the senior determine the amount he’s eligible for.
Charges for free loan information:The HUD does not recommend any service or company charging fee in order to provide reverse mortgage information. HUD offers free information on reverse mortgages through HUD approved counseling agencies. But there are scammers charging fees just to provide loan information to seniors.In order to avoid paying such fees, contact 1-800-569-4287 toll-free for the name and address details of a HUD approved reverse mortgage counseling agency in your area.
Document Forgery:The lender or the mortgage company may open an account for the loan proceeds and forge the borrower’s name in order to access the account. Also, there are lenders who may encourage borrowers to sign on unfinished documents thereby changing the loan terms and amount.The best way to avoid forgery is to keep away from signing blank papers or those in which corrections would be made later by the lender. Try to protect access to your checking and other accounts. Also, check your loan statements thoroughly so that later on you don’t come across any problem.
Posing as government representative:One of the most popular reverse mortgage programs is the HECM insured by the HUD. But the HUD does not offer reverse loan. The HECM is mainly offered by HUD approved lenders. However, certain salesmen are known to represent themselves as government representatives or volunteers for non-profit organizations thereby committing reverse mortgage frauds.
Reverse mortgages are loan products that can help seniors pull cash out of their equity, pay off unexpected medical bills, supplement social security income etc. Therefore, if you’d like to get the maximum benefit from the loan, it’s best to understand how a reverse mortgage works and avoid being a victim of scams associated with it.
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