Tuesday, March 26, 2024

Are Reverse Mortgages A Ripoff

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How To Avoid Reverse Mortgage Scams

Reverse Mortgages Are SCAMS!!! – Dave Ramsey Rant

Knowing the common reverse mortgage scams and their red flags is a good way to protect yourself from getting conned. However, there are additional ways to play it safe.

  • Talk to trusted experts, including your financial advisor and real estate attorney.
  • Talk to trusted family members and ask for their help in learning more about the loan and the lender youre working with.
  • Make sure you understand everything before signing anything. Be sure to ask questions about anything you do not understand and have a trusted loved one or attorney review the documents before you sign them.
  • Research your reverse mortgage lender to make sure theyre a reputable company. Visit your lenders website and social media pages, check their standing with the Better Business Bureau and read reviews from past clients.
  • Ignore any unsolicited advertisements, phone calls and emails.
  • Sign up for reverse mortgage counseling even if you are not required to take it.
  • If you think someone is trying to scam you, call HUDs Office of Inspector General hotline at 347-3735 to report it.

If youre thinking about getting a reverse mortgage, consider getting a home equity conversion mortgage , which is insured by the government, is only provided by FHA-approved lenders and has additional guidelines put in place to protect borrowers.

Replies To Suze Orman Says Yes To Reverse Mortgages

  • says:

    I just got a quote on a reverse mortgage. The cost to be upfront to borrow a 48% of the value of my home would be in excess of $17,000. The bulk of this cost is a huge lump sum to FHA. Why the huge cost to get my own money on the property? Home value estimated to be $350,000. Zero balance on home loan.

  • Phone | State Licensing | NMLS #76801 Access Link

    ©2022 Zyng, Inc. dba Zyng Mortgage, Zyng Mortgage Co, MLS Reverse Mortgage, MLS Mortgage and NextView Reverse Mortgage | NMLS #76801

    Real Estate Broker, California Department of Real Estate #01456165 | CA Department of Financial Protection and Innovation. Loans made pursuant to California Finance Lenders Law, License #60DBO-86253 | Colorado Mortgage Company Registered by the Division of Real Estate | Florida Office of Financial Regulation Mortgage Broker Business License #MBR729 | Idaho Mortgage Broker License #ML-5709 | Oregon Mortgage Lending License #ML-6909 | Texas Mortgage Broker | Washington Mortgage Broker License #MB-76801

    Reverse Mortgages are neither endorsed nor approved by the Federal Government. The FHA provides certain insurance benefits for lenders and borrowers in connection with the lenders HECM loans the FHA does not make or originate loans. It is strongly advised that you consult with your family and / or trusted financial planner when considering any reverse mortgage loan.

    This material is not from HUD or FHA and has not been approved by HUD or a government agency.

    The Bottom Line: Trusted Advice Is The Best Scam Protection

    All in all, reverse mortgage scams are intended to steal a homeowners equity, leaving them with little left in the home and potentially putting them in danger of losing the property.

    Reverse mortgages are complex loans, making them the perfect product for a scam. Its imperative that homeowners educate learn everything they can about the loan product and the lender offering the product. One of the best ways to protect yourself or a loved one is communication. Talk about any potential offers with a trusted family member, licensed Home Loan Expert, financial advisor or real estate attorney. They may be able to help you better understand this complex loan offer up alternative options and help you determine whats the best option for your financial goals.

    Get approved to refinance.

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    Misleading Advertising From Risky Lenders

    Many risky reverse mortgage lenders use misleading TV and radio ads to lure their victims. In most cases, these ads promise âtax-free moneyâ or neglect to explain the risks and costs involved with taking out reverse mortgages.

    A Consumer Finance Protection Bureau survey found that most people who viewed ads for reverse mortgages were left confused or misinformed .

    Warning signs of a misleading advertising scheme:

    • An ad claims you can get “tax-free money.” But reverse mortgage proceeds aren’t taxed to begin with â because a reverse mortgage is a loan and not income.
    • An ad mischaracterizes a loan and fails to disclose its associated fees, conditions, or risks.
    • The ad sounds too good to be true.

    How to avoid this scam:

    Follow the golden rule of fraud prevention: If it seems too good to be true, it probably is. Ignore ads for reverse mortgage products, and speak with your financial advisor or bank instead.

    Reverse Mortgage Investment Scheme

    AAG reverse mortgage review If youre considering a reverse mortgage ...

    HOW IT WORKS: A sales representative tries to persuade you to use your reverse mortgage for estate planning and invest the money into an insurance product or annuity promising high return as part of an estate.

    WHY ITS BAD: The investments may be fraudulent or come with excessively high fees payable to the financial advisor. The advisor doesnt explain that the returns may not offset the mortgage interest charges accruing each month on the reverse mortgage loan balance.

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    Overly Complicated Reverse Mortgage Contracts

    Some lenders will make bold claims that wonât be reflected in the contract. Or in other cases, the contracts will be so long and complicated that you wonât be able to understand what your obligations are.

    The scammerâs goal is to get you to foreclose on your house. Because reverse mortgages are federally insured, the government will make up most of the difference between whatâs owed on the loan and what the lender recoups from selling the home.

    Warning signs of a foreclosure scheme:

    • The contract contains unexplained fees and complicated interest schedules.
    • The lender claims you can move out of your home without worrying about the loan coming due.
    • The lender claims you donât have to worry about property taxes, mortgage insurance, or keeping your home in good shape.

    How to avoid this scam:

    Never sign a contract that you donât understand. Make sure you understand your obligations and what terms would violate your mortgage contract . If in doubt, contact the Federal Housing Administrationâs Homeowner Help Line.

    In the news: 83-year-old Gerda Graf was one of thousands of senior Florida residents whose home was foreclosed when she couldnât keep up with her taxes or home maintenance .

    Reverse Mortgage Fraud Is Often Committed By Someone You Know

    According to this article by the Wall Street Journal, the victims of reverse mortgage scams often know the perpetrator. The perpetrator could be a financial advisor or even a family member. Though the entire story is worth reading, well focus in particular on the case of Larry Bekis from St. Paul, Minn. In 2006, Bekis arranged for a his 84-year-old mother to take out a reverse mortgage on her home. Once the transaction was completed, he stole more than $100,000 from the proceeds and stopped paying for his mothers nursing home care.

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    Reverse Mortgage Scams To Watch For

    Reverse mortgages are increasingly popular as a retirement planning tool for homeowners and give them flexible access to their home equity. However, as aging seniors become more socially isolated, scammers have more opportunities to target them with reverse mortgage scams.

    Knowing the signs of these schemes can help you or a loved one avoid being taken advantage of by fraudsters.

    Explore All Your Options

    Reverse Mortgages Are A Scam

    On its surface, a reverse mortgage might sound like an ideal way to use your home for income. However, both upfront and ongoing costs accompany a reverse mortgage, along with a variable interest rate. Another pitfall: Because interest and fees are tacked on to the loan balance each month, the balance increasesâand as the balance goes up, your home equity goes down.

    Because of the numerous downsides to reverse mortgages, be sure to explore all of your borrowing alternatives to ensure your finances don’t end up going in reverse.

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    Key Reverse Mortgage Scam Red Flags

    While the scams may be different, many of them tend to use the same tactics to confuse potential victims. When considering a reverse mortgage, watch for these red flags:

    • The business uses terms that are difficult to understand and explains them poorly.
    • The offer seems too good to be true.
    • The lender uses high-pressure sales tactics.
    • Youre getting unsolicited advertisements, emails and phone calls.
    • Youre getting voice-recorded phone calls with generic messages.
    • The business tells you not to contact your current lender or speak to a real estate attorney or financial advisor.
    • The business wants to charge you fees for obtaining information on a reverse mortgage.

    You should never pay for this information. Along with the many free reverse mortgage resources offered online, the Department of Housing and Urban Development also provides free reverse mortgage information on its website.

    When It Doesnt Make Sense

    Reverse mortgages might not be the right choice for some people.

    One scenario where one would be a bad idea is if you own multiple homes and split time among them. You can only get a reverse mortgage on a primary residence. If its tricky to prove which of your homes is your primary residence, you might face foreclosure.

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    How To Report Fraud

    Many seniors who have experienced reverse mortgage fraud do not report the crime to the authorities. Whether you are ashamed, fearful, or have another reason for hesitation, its important that you come forward and report the crime. The authorities may be able to help you recover your personal losses, and you may save other seniors from suffering the same fate. Here are a few helpful links for reporting fraud.

    You Can Get Free Income

    Understanding Key Reverse Mortgage Terms

    How it works: Some advertisers claim you can obtain free income with a reverse mortgage. In reality, you receive loan payments, not income, which is why the money you receive isnt taxed.

    Why its bad: Ads taking this approach might not disclose the fees youll pay, either, and the fact that if you fail to pay for homeowners insurance or property taxes or maintain the property, you could lose your home.

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    Pros And Cons Of A Reverse Mortgage

    • You can still live in your home while you have the reverse mortgage

    • Turn home equity into a source of cash or income

    • The income is tax-free

    • Your risk is limited, in some cases

    • Reverse mortgages come at a cost

    • May not get as much value out of your home

    • Restrictions on what you can do with your home

    • Risk of foreclosure

    Be Wary Of Sales Pitches For A Reverse Mortgage

    Is a reverse mortgage right for you? Only you can decide what works for your situation. A counselor from an independent government-approved housing counseling agency can help. But a salesperson isnt likely to be the best guide for what works for you. This is especially true if he or she acts like a reverse mortgage is a solution for all your problems, pushes you to take out a loan, or has ideas on how you can spend the money from a reverse mortgage.

    For example, some sellers may try to sell you things like home improvement services but then suggest a reverse mortgage as an easy way to pay for them. If you decide you need home improvements, and you think a reverse mortgage is the way to pay for them, shop around before deciding on a particular seller. Your home improvement costs include not only the price of the work being done but also the costs and fees youll pay to get the reverse mortgage.

    Some reverse mortgage salespeople might suggest ways to invest the money from your reverse mortgage even pressuring you to buy other financial products, like an annuity or long-term care insurance. Resist that pressure. If you buy those kinds of financial products, you could lose the money you get from your reverse mortgage. You dont have to buy any financial products, services or investment to get a reverse mortgage. In fact, in some situations, its illegal to require you to buy other products to get a reverse mortgage.

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    Are Scammers Trying To Steal Your Home Equity

    The COVID-19 pandemic has not only impacted the health of Americans â it has also hit their wallets.

    In 2021, the percentage of Americans worried that theyâll never be able to retire reached an all-time high of 44% . Even worse, 25% of people in their 60s say they couldnât last more than three months living off their savings.

    Itâs a dire situation across the country. And as a result, many homeowners are looking to refinance their homes to unlock equity and gain some financial breathing room.

    But homeowners arenât the only ones eyeing their homeâs equity. Criminals are targeting homeowners â especially the elderly â with reverse mortgage scams.

    Reverse mortgage scams include schemes designed to trick you into signing over your home title, unscrupulous contractors, and exorbitant feesâ all of which can drain your homeâs equity.

    So, how can you tell if a reverse mortgage is a scam as opposed to a legitimate financial safety net?

    In this guide, weâll explain everything you need to know about reverse mortgage scams, how to identify them, and how to safely benefit from the value of your home.

    Is A Reverse Mortgage Safe

    Reverse Mortgages Are SCAMS!

    Let’s say you break a hip and need to recover in a care facility. If you don’t have the money to pay for it and don’t want to empty your bank accounts so Medicare will take over, a reverse mortgage might be a good way to pay that expense using the equity in your home.

    This is important to remember, though: You are free to only take as much as you need to pay that medical expense and to repay it when you can. There’s no reason to use all the equity in your house if you don’t have to.

    So yes, a reverse mortgage can be safe. Your best move is to speak with someone you trust first, whether that’s a grown child, your attorney, or your financial advisor. Never allow a salesperson to talk you into a reverse mortgage that you do not fully understand.

    Finally, if you do take out a reverse mortgage, make it a HECM. HECMs are insured by the government and provided through FHA-approved lenders. These lenders have additional guidelines in place meant to protect you as a borrower.

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    Fraud By Relatives And Others

    Similar to vendor and contractor fraud, fraud by a financial planner or other investment advisor involves someone trying to sell you a financial product you may not need and suggesting you take out a reverse mortgage. If this person is unscrupulous or ill-informed enough to propose a reverse mortgage to finance the purchase of stocks, an annuity, or whole life insurance, they probably arent selling you something thats in your best interest.

    Be careful about giving others the power of attorney over your affairs. This document enables the holder to conduct financial affairs on your behalf, including taking out a reverse mortgage. Children and other people whom seniors have entrusted to manage their affairs have secured reverse mortgages in the seniors name, then diverted the proceeds to their own accounts. Some swindlers have even managed to secure reverse mortgages for dead relatives.

    Delayed Social Security Benefits Scam

    If someone gives you financial advice, this could be a scammer or a lender, telling you that you should hold off on social security benefits and instead take out a reverse mortgagedont listen.

    The basic idea here is that an organization might tell you to wait on social security for now, so that you can get more money later. By putting off social security payments, you may be able to get more money every month when you do sign up. In the meantime, they may say that taking out a reverse mortgage will cover your cost of living. However, that is often times just not true.

    Reverse mortgages, although they are a loan of your equity, are still a loan. This means, youll still have to pay it back with interest and fees. Sometimes the interest and fees associated with this type of loan are quite high. So, in the end, youll have to pay much more money on your loan than you would have if you had signed up for social security benefits on time. Large fees and interest can add years on to your loan, so if youre in need of money, research other options before you ever think about a reverse mortgage.

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    The Bank Will Own My Home

    Not at all. Just like any mortgage, you continue to own your own home, with your name on title. As with any home loan, the loan amount will reflect on record. Of course, you must keep your loan obligation: maintaining your property tax payments, homeowners insurance, and homeowners association fees and keeping your home in a liveable condition.

    Who Is Eligible To Receive A Reverse Mortgage

    Reverse Mortgage: The Pros and Cons of Reverse Mortgages

    These loans are not available for every homeowner. Heres how to get a loan from a reverse mortgage lender:

    • Must be at least 62 years of age: The amount you can borrow is based on your age and how much equity you have in your home.
    • Must be your principal residence: You must live in the home the majority of the year.
    • Have equity in your home: In order to qualify, you should own your home outright or have a low mortgage balance. If you have an existing mortgage, the reverse mortgage will pay off your current mortgage in addition to giving you access to your equity.
    • Not delinquent on any federal debt: If youre applying for a HECM, the most common type of reverse mortgage, you cant be delinquent on federal debt such as student loans or income taxes.
    • Have money available to pay ongoing property expenses: If you cant provide proof that youre able to cover ongoing expenses, such as property taxes and homeowners insurance, then a portion of your loan proceeds may be set aside to ensure they are paid.
    • Home must be in good shape: Before the loan closes, your home will be inspected and you may be required to complete repairs before your loan can be funded.
    • May be required to undergo counseling: In order to qualify for a HECM loan, you must receive counseling from a HUD-approved counseling agency to discuss eligibility, consequences of the loan, and potential alternatives.

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