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Reverse Mortgage Scams: 5 Red Flags

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This week, I will be doing a series on “Reverse Mortgage Scams.” You will be able to find out how to spot red flags and how to protect yourself from a reverse mortgage scam. Enjoy and hope you find this week’s series informative.

Reverse Mortgage Scams

A reverse mortgage can be a great financial tool to help you during your golden years. However, like many industries, there are people out there that will try to “pull a fast one” on you. It is important for me to help you be aware of these scammers and predators, and to teach you how to spot the red flags. These criminals tend to target seniors because they feel you are vulnerable, however, as long as you know what to look out for – you can protect yourself!

Red Flags for Reverse Mortgage Scams

1. The lender does not allow you to pick your reverse mortgage counselor. – It is illegal for a lender to appoint a counselor for you.  A reverse mortgage counselor is supposed to be an unbiased third-party who, simply, goes over the reverse mortgage process with you. They will also help you review all of your options, to make sure the reverse mortgage is the best thing for you. If you lender makes you use a specific counselor, they could be trying to pressure you into get a reverse mortgage loan. Be advised that there is a fee for reverse mortgage counseling.

2. You’ve received an unclear or incomplete loan package. – If you are missing documents, such as a “Good Faith Estimate,” this can be a sign that the lender is trying to hide their fees for processing the reverse mortgage loan. Also, you should receive a document that clearly states your loan’s interest rate and that it has been locked in place.  If your lender refuses to give this to you, this could be a sign that something unethical is going on and should be a red flag. Once you receive your loan documents, look over it to be sure that you received a complete loan package. If you think you are missing something or if the documents are unclear, ask your lender.  They should be happy to help you but if not, your red flag should go up.

3. Being charged for free information. – Be wary of  those who attempt to charge you for reverse mortgage information, such as an application fee or an upfront fee. The lender will receive payment for the work they do to process your reverse mortgage loan but are not allowed to charge an application fee, upfront fees or consultation fee. If you choose to speak with an attorney or accountant, they might charge for their services and this is an industry standard.

4. You received requests for unspecified and expensive repairs.  – Your must meet minimum FHA property standards in order to receive a reverse mortgage, and in some cases you might need to make repairs in order to qualify.  If your lender tells you that repairs must be done on your home, make sure they explain the specifics of the repairs to you and why they are need.  Also, it is a good idea that you shop around for the best possible cost and get at least three different quotes for repairs. A red flag should go up if your lender pressures you to work with a specific contractor, and advise you against getting multiple quotes.  They might be trying to overcharge you.

5. Being pressured to buy insurance or other products – If your lender tries to get you to use your reverse mortgage proceeds to purchase an annuity or whole life insurance product, beware.  It is illegal for your lender to pressure you into purchasing any additional products or services with your reverse mortgage proceeds.

Have reverse mortgage questions/concerns? Call 1-888-808-8486 to speak with a Senior Advisor.

Read Related Articles:

How to Protect Yourself from Reverse Mortgage Scams

How to Prevent Identity Theft

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