12 Jul Reverse Mortgage Fraud Red Flags
Three red flags signaling possible reverse mortgage fraud are 1) pressuring a homeowner to take out a reverse mortgage for financial products, a vacation or home repairs; 2) claims that a reverse mortgage is a government grant that does not have to be repaid; and 3) Claims that a borrower cannot outlive the reverse mortgage or lose his home.
A borrower seeking to incur a reverse mortgage must obtain counseling before taking out the mortgage. The Federal Trade Commission has issued four points of advice for spotting reverse mortgage deceptive claims and practices:
- Focus on the key features of the loan, like the interest rate, fees, loan payments, and total cost. If you see a sizable discrepancy between the terms the lender or broker offers and the terms typically offered, consider it a sign of possible deception.
- Look at whether the claims being made are broad and unqualified. Some claims may be false or misleading if a marketer does not clearly and prominently indicate that the claims apply only to certain people or to certain products in limited circumstances. For example, it might be deceptive if a marketer makes claims like â€œreverse mortgages provide income for life,â€ â€œconsumers can never lose their homes,â€ or â€œborrowers can never outlive their reverse mortgage,â€ but doesnâ€™t disclose that payments may stop and consumers may lose their homes if they move out of the house or violate another condition of the mortgage, like failing to pay property taxes or insurance.
- Consider the names, seals, logos, and other representations of the lenders and brokers. Some may look and sound like those of government agencies. The m.o. here is to create the impression that the lender or broker is part of â€” or affiliated with â€” a government program rather than an organization offering a loan that the client must pay back.
- Ask your clients if they have felt pressured in any way to use a reverse mortgage to buy products or services like long-term care insurance, annuities, investments, home repair, or travel. Some sellers may try to convince a consumer to get a reverse mortgage just to buy the products theyâ€™re selling.
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