Arm Yourself With Information to Prevent Being Taken In By A Reverse Mortgage Scam
New legislation has been put in place just to help prevent seniors from being taken in by scammers in the reverse mortgage industry. If you or a member of your family is considering a reverse mortgage, read the tips below to help protect yourself from unscrupulous lenders.
Con artists prey on those that are too trusting and don’t read the fine print; however, a con artist’s worst fear is a well-read borrower. A senior armed with information about federal consumer safeguards and protections is far less likely to be taken in by a fraudulent reverse mortgage lender. Knowledge is power; the more you know about reverse mortgages and housing laws, the better prepared you will be.
1. Find a counselor that is recommended by one of the three major lenders, and meet with them face to face rather than over the phone. Reverse mortgage counseling is required before beginning the reverse mortgage application process. These counselors are overseen by the Department of Housing and Urban Development (HUD). Counseling sessions are designed to:
• inform borrowers of their rights and responsibilities
• outline the alternatives to reverse mortgages
• offer financial guidance to prospective borrowers
Contact HUD or the FHA for information about government-approved counseling agencies.
2. Beware of forgeries. Never sign anything without reading the contents of the document carefully. Lenders are required by law to disclose the Total Annual Lending Cost (TALC) for the loan, so examine the contents of this report carefully. Never sign any document with blanks or errors.
3. Know what you’re being charged. Many reputable companies will not charge for reverse mortgage counseling. Be wary of companies that have many nominal fees. The government has put in place restrictions for the initial costs of a reverse mortgage. You should be aware of these cost limitations and understand that lenders cannot require you to purchase insurance, annuities, or other similar products as a condition of getting a reverse equity mortgage.
4. Know who you’re dealing with by conducting independent research to find a reverse mortgage lender. Borrowers will do better to find and contact a lender rather than have them finding you. Be wary of those who make unsolicited phone calls and use high-pressure sales tactics. You should also check out the financial and complaint history of any company you deal with by going to the Better Business Bureau’s Web site at www.bbb.org or www.ripoffreport.com.