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Reverse Mortgage Fraud

Due to the complexity of reverse mortgages, this option serves as an open door for scammers that understand the product in order to take advantage of unsuspecting seniors and their families that do not. Reverse mortgage products are specifically designed for senior citizens: a demographic that is the most likely to fall victim to fraud.

What is a Reverse Mortgage?

A reverse mortgage is a loan product whereby a qualifying senior can borrow the money against the equity in their home. The loans are not paid back monthly like traditional mortgages, rather they are paid back at the time the senior sells her home or at the time of her death.

Common Reverse Mortgage Scams

There are three major reverse mortgage programs: HUD’s HECM, Fannie Mae’s Home Keeper and Financial Freedom. All of these programs require seniors to undergo mandatory counseling with an independent counselor who is specifically trained in reverse mortgages. These counseling sessions are required before a senior can take out a reverse mortgage. The counseling session is designed to explain to the senior, in plain English, how the reverse mortgage works. Some of the more commons scams with reverse mortgages are below.

1. Faux counseling agents charging seniors fees for the counseling service.
2. Having another person pretend like they are the senior in order to get the counseling requirement accomplished. Some counseling sessions can be done by phone, this is not recommended. The premise behind this type of scam is to keep the information away from the senior so they won’t know how a reverse mortgage is supposed to work.
3. Intercept the check from the title company and cash it. This involves forgery as well, because the scammer must forge the name of the senior citizen in order to cash it (bank fraud-theft).
4. The scammer will tell the senior that she must pay the loan back monthly, and the senior ends up writing mortgage checks to the scammer. Reverse mortgages are never paid back monthly, the loan gets paid when the house is sold or at the time of death.
5. The scammer will run up the credit line, take the money, and disappear.