Reverse mortgage scams, including foreclosure flips, repair scams, and counseling scams, can leave homeowners with little or no assets. Consumers should be wary of unsolicited advertisements, high-pressure sales tactics, and rushed decisions, and should seek legal advice before signing any contracts.
While reverse mortgages are a great way to create a steady stream of income during your retirement years, various reverse mortgage scams are found online and offline today. These scams typically make money by using a number of questionable tactics to gain control of the properties involved, in some cases evicting the owners. While there are many different types of reverse mortgage scams, most of them are variations on three basic models: foreclosure flips, reverse mortgage repair scams, and even reverse mortgage decision-front counseling scams. .
When it comes to reverse mortgage scams, one of the most effective approaches is to provide consumers with advice that is more intended to promote a specific scam operation than to help consumers understand their options for obtaining a reverse mortgage. While a reputable advisor will focus on helping consumers assess their circumstances and explore the benefits and potential drawbacks of this type of financial arrangement, scam advisors focus only on the potential benefits, with little or no attention to how those benefits may or may not relate to consumers. A scam advisor is also likely to quickly zero in on no more than one or two heavily promoted programs, pointing out how those programs offer everything that has been discussed up to that point.
Scammers can also use the counseling phase as a way to create barriers between consumers and other reverse mortgage options that are actually better options. This is often done by denigrating specific programs, calling attention to certain fees or other terms of those programs that are not included in the one the counselor is promoting. As with any business situation, trying to sell a product by denigrating the competition is often a sign that something is wrong and the so-called great deal should be passed over.
Along with counseling, foreclosure switching is another common model for reverse mortgage scams. With this approach, the idea is to include terms in the contract that provide ample opportunity for scammers to use some minor excuse to claim the property, initiate a foreclosure, and put the house up for sale. At that point, the consumer must find financing to purchase the home or seek living arrangements elsewhere. In either situation, the consumer’s financial resources are depleted, leaving little or nothing for the remaining years.
Reverse mortgage scams can also take the guise of a property upgrade or repair strategy that ultimately leaves the owner with little or nothing in the way of assets. Here, the idea is to convince the owner that some improvements to the property are necessary to get the best deal on the reverse mortgage. Once this is done, it becomes clear that the updates did nothing to improve the terms of the mortgage. Instead, the repairs lined the pockets of those who arranged them, usually a partner of the reverse mortgage adviser. This leaves the homeowner with so-called improvements that he may not have wanted in the first place, and probably weren’t necessary.
Since reverse mortgage scams can be multi-layered, these three basic approaches can be combined into what seems like a very good deal. Consumers can protect themselves by refusing to deal with providers who resist having their contracts reviewed by a lawyer, who impose strict limits on offers, and who generally try to rush consumers so they don’t have adequate time to make a decision. It’s important to be wary of unsolicited advertisements, high-pressure sales tactics, and programs that don’t advertise a down payment only to include a range of fees and charges throughout the length of the contract. When in doubt, let the opportunity pass you by and focus your attention on lenders who are more willing to work with consumers at their own pace.
Smart Asset.
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