As the economy continues its downturn, reverse mortgages are on the rise. Reverse mortgages allow senior citizens to tap into their home’s equity and receive monthly payments for a lender. To be eligible for a reverse mortgage you must be aged 62 or older and own your own home or have a small mortgage.
According to the FBI and U.S. Department of Housing and Urban Development Office of Inspector General (HUD-OIG), reverse mortgages have increased more than 1,300 percent between 1999 and 2008.
Many consumers have turned to reverse mortgages or Home Equity Conversion Mortgages (HECM) to make ends meet, but now reverse mortgage scams are popping up. Scam artists are stealing equity from senior citizens looking to apply for reverse mortgages, and the FBI is warning that all consumers need to be alert.
The FBI warns that seniors are targeted by these scams through local churches, investment seminars and television, radio and mailer advertisements. In the scam, seniors have been offered free homes, investment opportunities and foreclosure or refinance assistance.
Seniors should take the following precautions when investigating a reverse mortgage or HECM:
- Don’t respond to unsolicited advertisements
- Be suspicious of any claims that you can own a home with no down payment
- Do not sign anything without fully understanding it and its legal ramifications
- Seek out your own reverse mortgage counselor
Other than following those tips, there is also a legitimate product for HECM loans that is insured by the Federal Housing Authority.
If you have already been a victim of a reverse mortgage scam and want to file a complaint call HUD’s Hotline at 1-800-347-3735 or file a complaint online at www.hud.gov/complaints/fraud_waste.cfm.
To learn more about reverse mortgages and how they work read Can Reverse Mortgages Save Seniors Facing Foreclosure? and Reverse Mortgage