Reverse Mortgage Scams

Today, the Office of the Comptroller of the Currency (OCC) released a consumer advisory in regard to reverse mortgages. http://occ.gov/ftp/advisory/2009-2.pdf

This comes at a time when many mortgage companies are advertising heavily before major changes take effect October 1, 2009. The S.A.F.E. Act will require that all condominium units go through a HUD approval process for reverse mortgages. Loan originators are using that date to push deals through, which may not benefit the consumer. In essence, buyer beware.

What is a reverse mortgage? It is a type of mortgage that allows you to convert the equity in your home into cash. You must be sixty-two-years of age to qualify. Most seniors use the money for repairs, living expenses, etc.  Unfortunately, many seniors have been victims of several types of scams. Normally, they fall into one of three categories:

  1. Charging for Free Information. Detailed information regarding consumer rights is available for free at HUD.org. Being an informed consumer is the best way to make sure you are not getting ripped off.
  2. Disregard of Pre-Counseling Loan Services If a company tries to perform pre-counseling over the phone, be concerned. Legitimate organizations will either have a face to face meeting, or offer one through a third party.
  3. Forgery. Never sign any paperwork with blanks that are incomplete. Never assign any checks to another party.

Ideally, reverse mortgages should be unnecessary when a solid financial plan is in place. The goal should be to have your mortgage paid off, and your retirement fully funded prior to reaching that stage in your life. These days, that is less and less the case.

If you or someone you know is considering a reverse mortgage, remember to do your homework. Don’t consider a reverse mortgage that is tied to another financial product, like an annuity. And don’t agree to something you don’t fully understand. Your home is your greatest financial investment. Be careful.

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