What is a reverse mortgage scam?
A reverse mortgage scam is any fraudulent activity that targets homeowners who are considering a reverse mortgage. Scammers may pose as lenders, counselors, or advisors and offer false promises or misleading information to convince homeowners to sign up for a reverse mortgage that isn't in their best interest.
Some common reverse mortgage scams include:
-
Foreclosure scams: Scammers may tell homeowners that they can help them avoid foreclosure by refinancing their homes with a reverse mortgage. However, the scammers may take out the loan themselves and pocket the proceeds, leaving the homeowner with a debt they can't repay.
-
Investment scams: Scammers may offer to invest the funds from a reverse mortgage in a high-yield investment opportunity. However, these investments are often fraudulent, and the homeowner may end up losing their equity and their retirement savings.
-
Identity theft: Scammers may pose as reverse mortgage lenders or counselors and ask for personal information such as Social Security numbers or bank account numbers. They may use this information to steal the homeowner's identity and commit fraud.
How can you protect yourself from reverse mortgage scams?
Here are some tips to help you avoid reverse mortgage scams and protect your home equity:
-
Work with a reputable lender: Do your research and choose a lender with a strong reputation and a track record of ethical behavior. Look for lenders who are certified by the National Reverse Mortgage Lenders Association (NRMLA).
-
Get counseling: Before applying for a reverse mortgage, you are required to receive counseling from a HUD-approved counselor. The counselor can help you understand the costs and benefits of the loan and identify any potential scams or red flags.
-
Be wary of unsolicited offers: If someone contacts you out of the blue with an offer that sounds too good to be true, it probably is. Be cautious of anyone who pressures you to sign up for a reverse mortgage without giving you time to think it over or consult with an independent advisor.
-
Don't sign anything you don't understand: Before signing any documents related to a reverse mortgage, make sure you understand the terms and conditions of the loan. If you're not sure about something, ask questions and seek clarification.
-
Don't give out personal information: Never give out personal information such as Social Security numbers or bank account numbers to anyone you don't know or trust.
By following these tips and staying alert for signs of fraud, you can protect yourself and your home equity from reverse mortgage scams. Remember, if something sounds too good to be true, it probably is. Take your time, do your research, and work with trusted professionals to make informed decisions about your finances and your home.