Avoiding Reverse Mortgage Scams

Has a company approached you offering a reverse mortgage opportunity? Before you decide, make sure you look for a few key warning signs. It may be a scam.

A reverse mortgage can be a lifesaver for many older homeowners. Some people, having reached 62 years old, are on a fixed income.

Being able to get a portion of their home’s equity in cash provides a sense of financial security. Sometimes, the only other income is retirement or Social Security.

However, there are unscrupulous people in the Real Estate and banking markets. Those people will find ways to cheat homeowners who need this financial assistance.

While reverse mortgages can be a good thing, they can also be a mechanism by which the homeowner loses out.

This is where scam artists come into play.

A reverse mortgage scam can lead to elderly homeowners becoming homeless in a matter of weeks.

Please continue reading to understand what a reverse mortgage is. It is important to know how companies may use them to scam homeowners. Find out how you can avoid a reverse mortgage scam.

How a Reverse Mortgage Works

For someone to obtain a reverse mortgage, the property must be his or her primary residence. The property should be owned fully by the applicant, or the individual should have a good amount of equity in the home.

Unlike the typical mortgage arrangement which sees mortgagors making monthly payments, this agreement makes funds available to the mortgagor.

This can be in the form of a line of credit, a lump sum, or monthly disbursements. The funds do not have to be repaid unless the homeowner dies, moves out, or sells the home.

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Reverse Mortgage Scams, and How to Avoid Them

Some types of reverse mortgage fraud to look out for are those perpetuated by:

  • Vendors and contractors. Vendors and home contractors may try to take advantage when older clients are unable to pay for their services. They sometimes persuade them to take on reverse mortgages to pay the bill.
  • Financial advisers. When trying to get homeowners to agree to and sign off on a reverse mortgage proposal, the adviser may not fully explain the risks (similar to loan modification scams). Sometimes these individuals even downplay the risks to get applicants to sign.
  • Relatives and friends. Seniors are sometimes advised by those closest to them to take on these mortgages. These relatives and friends usually want this money to deal with their own expenses.

These are people in a position of trust who know exactly how vulnerable their patients are. They are often open to suggestion, so there is usually little trouble getting them to sign documents they have not read or even understand.

Flipping fraud is another example of this type of activity. This involves a situation where a realtor offers a home for a low price without revealing all of the problems with the property.

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Lack of Legal Representation or Knowledge

Unfortunately, there doesn’t need to be much pressure for a senior citizen to fall prey to these mortgage traps. Just being desperate for money can cause them to seek out these financial products after seeing an ad on the Internet or on television.

With little legal protection in cases of reverse mortgage fraud, seniors need to take steps such as:

  • Not signing over power of attorney to a friend or relative without understanding exactly what this involves. Someone can take out a reverse mortgage without your knowledge once they have the power of attorney, so get advice from a lawyer before taking this step.
  • If you are buying a home, get an inspection before making the purchase. Someone may trick you into buying a house that needs significant repairs. If you are unable to pay for these repairs, you may then feel the need to take on a reverse mortgage to finance the repairs that are needed.
  • If you plan to hire a contractor, work out all the terms of the project before signing a contract. Check your budget and make sure that you can afford the work. If you can’t, you may be convinced to take out a reverse mortgage to pay the contractor for the work done.
  • You should only deal with licensed and reputable financial advisers. Some online research can tell you whether this person has amassed complaints or fraud charges. Avoid doing business with any financial adviser if you have difficulty finding information on them or the company they represent.

One of the disadvantages of reverse mortgage contracts is that they are usually complex. Learning as much as you can before taking this step can keep you from waking up one day to find out that you have lost your home and have no money.

As such, you need to get a lawyer or someone who understands mortgages, and in particular reverse mortgages to help you navigate the paperwork before signing.

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Conclusion

The reverse mortgage has a lot of potential for elderly homeowners who are barely scraping by on Social Security or retirement payments.

Unfortunately, not every lender or mortgage specialist has the homeowner’s best interest at heart. Some are in it for pure greed and will ultimately push the homeowner out of his or her home.

Homeowners should always make sure that they understand the legal repercussions for any decision they make before signing on the dotted line.

No one should ever sign legal documents without a good understanding of what they’re signing. Request the assistance of a Real Estate Attorney in your area if you’re considering a reverse mortgage.

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Reporting Fraud

Reverse mortgage fraud is a crime and should always be reported to the proper authorities. Reporting the crime, even if you’re embarrassed that it happened to you, is the only way to stop this from happening to other unsuspecting senior citizens. The authorities may even be able to help recover your losses.

Have you or someone you love been a victim of a reverse mortgage scam? Please share your story with us here in the comments section so that it is visible for other people who may be considering entering into a similar contract with a mortgage specialist. Your personal story could keep someone else from making a similar mistake.

Back to Top

Resources
  • http://www.nolo.com/legal-encyclopedia/reverse-mortgage-scams.html

Avoiding Reverse Mortgage Scams

Has a company approached you offering a reverse mortgage opportunity? Before you decide, make sure you look for a few key warning signs. It may be a scam.

A reverse mortgage can be a lifesaver for many older homeowners. Some people, having reached 62 years old, are on a fixed income.

Being able to get a portion of their home’s equity in cash provides a sense of financial security. Sometimes, the only other income is retirement or Social Security.

However, there are unscrupulous people in the Real Estate and banking markets. Those people will find ways to cheat homeowners who need this financial assistance.

While reverse mortgages can be a good thing, they can also be a mechanism by which the homeowner loses out.

This is where scam artists come into play.

A reverse mortgage scam can lead to elderly homeowners becoming homeless in a matter of weeks.

Please continue reading to understand what a reverse mortgage is. It is important to know how companies may use them to scam homeowners. Find out how you can avoid a reverse mortgage scam.

How a Reverse Mortgage Works

For someone to obtain a reverse mortgage, the property must be his or her primary residence. The property should be owned fully by the applicant, or the individual should have a good amount of equity in the home.

Unlike the typical mortgage arrangement which sees mortgagors making monthly payments, this agreement makes funds available to the mortgagor.

This can be in the form of a line of credit, a lump sum, or monthly disbursements. The funds do not have to be repaid unless the homeowner dies, moves out, or sells the home.

Back to Top

Reverse Mortgage Scams, and How to Avoid Them

Some types of reverse mortgage fraud to look out for are those perpetuated by:

  • Vendors and contractors. Vendors and home contractors may try to take advantage when older clients are unable to pay for their services. They sometimes persuade them to take on reverse mortgages to pay the bill.
  • Financial advisers. When trying to get homeowners to agree to and sign off on a reverse mortgage proposal, the adviser may not fully explain the risks (similar to loan modification scams). Sometimes these individuals even downplay the risks to get applicants to sign.
  • Relatives and friends. Seniors are sometimes advised by those closest to them to take on these mortgages. These relatives and friends usually want this money to deal with their own expenses.

These are people in a position of trust who know exactly how vulnerable their patients are. They are often open to suggestion, so there is usually little trouble getting them to sign documents they have not read or even understand.

Flipping fraud is another example of this type of activity. This involves a situation where a realtor offers a home for a low price without revealing all of the problems with the property.

Back to Top

Lack of Legal Representation or Knowledge

Unfortunately, there doesn’t need to be much pressure for a senior citizen to fall prey to these mortgage traps. Just being desperate for money can cause them to seek out these financial products after seeing an ad on the Internet or on television.

With little legal protection in cases of reverse mortgage fraud, seniors need to take steps such as:

  • Not signing over power of attorney to a friend or relative without understanding exactly what this involves. Someone can take out a reverse mortgage without your knowledge once they have the power of attorney, so get advice from a lawyer before taking this step.
  • If you are buying a home, get an inspection before making the purchase. Someone may trick you into buying a house that needs significant repairs. If you are unable to pay for these repairs, you may then feel the need to take on a reverse mortgage to finance the repairs that are needed.
  • If you plan to hire a contractor, work out all the terms of the project before signing a contract. Check your budget and make sure that you can afford the work. If you can’t, you may be convinced to take out a reverse mortgage to pay the contractor for the work done.
  • You should only deal with licensed and reputable financial advisers. Some online research can tell you whether this person has amassed complaints or fraud charges. Avoid doing business with any financial adviser if you have difficulty finding information on them or the company they represent.

One of the disadvantages of reverse mortgage contracts is that they are usually complex. Learning as much as you can before taking this step can keep you from waking up one day to find out that you have lost your home and have no money.

As such, you need to get a lawyer or someone who understands mortgages, and in particular reverse mortgages to help you navigate the paperwork before signing.

Back to Top

Conclusion

The reverse mortgage has a lot of potential for elderly homeowners who are barely scraping by on Social Security or retirement payments.

Unfortunately, not every lender or mortgage specialist has the homeowner’s best interest at heart. Some are in it for pure greed and will ultimately push the homeowner out of his or her home.

Homeowners should always make sure that they understand the legal repercussions for any decision they make before signing on the dotted line.

No one should ever sign legal documents without a good understanding of what they’re signing. Request the assistance of a Real Estate Attorney in your area if you’re considering a reverse mortgage.

Back to Top

Reporting Fraud

Reverse mortgage fraud is a crime and should always be reported to the proper authorities. Reporting the crime, even if you’re embarrassed that it happened to you, is the only way to stop this from happening to other unsuspecting senior citizens. The authorities may even be able to help recover your losses.

Have you or someone you love been a victim of a reverse mortgage scam? Please share your story with us here in the comments section so that it is visible for other people who may be considering entering into a similar contract with a mortgage specialist. Your personal story could keep someone else from making a similar mistake.

Back to Top

Resources
  • http://www.nolo.com/legal-encyclopedia/reverse-mortgage-scams.html

Avoiding Bankruptcy Scams

Consumers beware: bankruptcy scams operated by cons and fraudulent firms are preying on the short and long-term financial well-being of those already in desperate situations.

Perhaps you think you are out of options.

Your finances have been upside down each month for the last year. No matter how much effort you put into changing that around, a workable solution doesn’t seem available to you.

You are behind on the mortgage, and your credit cards are maxed out. No bank or other lending agency is willing to give you any additional funds. Your friends and family may not be able to help you out financially.

Therefore, you have decided you are going to file for bankruptcy.

Be aware: there are companies out there which will act like they want to help you with this process. Unfortunately, they may turn out to be operating a bankruptcy scam.

How can you tell if the firm is a legitimate company or a scam? There are a few indicators for which you should be on the lookout.

Recommendation: Work directly with a lawyer.

There is one easiest way to ensure you have a legitimate partner during this process. That is by going directly through a bankruptcy lawyer.

Lawyers have a license to practice law. To maintain that license, they need to adhere to certain rules and regulations.

If they perform an action which is not legal, they could lose their license. Therefore, you have the assurance that the information they give you is accurate.

Depending upon the area in which you live, there may be numerous lawyers to choose from. You may be able to consult with one of your choosing for free on an initial visit. That way, you can ensure you are comfortable with the attorney as your representative.

The attorney should be able to walk you through your available options. This includes the various types of bankruptcy which are available. In addition, they may help you explore all other non-bankruptcy options.

If you decide you do not want to go with a lawyer and want to instead go with an agency, you can.

Here are some activities an agency may perform. These should raise a red flag before you ever agree to working with the agency.

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Do they ask for money upfront?

If a company asks you for money upfront to deal with your bankruptcy or credit issues, steer clear.

They may say you need to pay for a credit report. That is not true. There are numerous agencies from which you can get your credit report for free.

They may say there are administrative costs which you must pay before they accept you as a client. Again, this should not be the case.

Your best bet: find a non-profit organization/firm to work with. These organizations generally do not require upfront payments to begin your bankruptcy process.

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Do they offer a ‘Quick Fix’?

The adage of “If it sounds too good to be true, it probably is” applies to bankruptcy services.

If there is a quick fix to help with getting you out of debt, you would already be aware of it.

To be clear, there is no quick fix for getting out of debt. That is, unless you happen to come into a windfall of cash.

The tried-and-true process of budgeting and methodically paying down your debt over time is best. This is repeated by personal finance experts time and time again. When it comes to getting out of debt, that’s the only answer you’ll need.

Be very wary of any company promising you a ‘quick-fix’.

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What do they say will happen after the Bankruptcy is filed?

There is so much information available concerning how to apply for a bankruptcy. But what services does an agency offer after you file for bankruptcy?

There are numerous steps within the process. It does not end when the bankruptcy is filed. The main question to ask them is what will happen to your credit report once the bankruptcy is filed.

If they tell you the negative information on your credit report will fall off, this should set off another alarm. No company should be offering or telling you negative, legitimate information will fall off your credit report, as if it never happened.

Although filing a bankruptcy allows you to clear some debt you may have, your credit score will be negatively affected by the bankruptcy filing for up to seven years.

If the company you choose does not warn you of all the negative effects that filing a bankruptcy will cause, then they are clearly not putting your best interest at the forefront.

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Final Thoughts

Unfortunately, when it comes to filing for bankruptcy, there are numerous companies out there who want to take advantage of your desperation.

These firms or agencies will generally promise you things they cannot deliver. It’s imperative for you, as an educated consumer, to be wary of empty promises from companies who do not also offer realistic expectations or consequences.