Top 4 Reverse Mortgage Scams to watch out for

Reverse mortgage is a popular mortgage program helping seniors get money from home in order to pay for living expenses, home repair work, medical bills and other costs. But the reverse mortgage industry isn’t free from its share of frauds and scams just as the entire mortgage or credit industry.

If you’re a senior looking to tap equity with a reverse loan, here’s a list of the top 4 reverse mortgage scams you should avoid in order to make a successful deal.

1. Pay for information scam: As per the HUD rules, you needn’t pay a fee if you’re going for a reverse mortgage consultation. But there are companies who call themselves estate planners and offer to provide reverse mortgage information for a certain fee. It’s better to stay away from such companies as many have lost thousands of dollars in availing such a service.

2. Downplay loan counseling: There are unscrupulous companies and lenders who may even downplay the importance of pre-loan counseling. But all major reverse mortgage programs require you to attend a loan counseling session with a trained reverse mortgage counselor.

Though counseling through telephone is allowed, yet it’s best to have a face-to-face meeting with the counselor and get a basic understanding of how these loans work. It helps you avoid being a victim of scam.

3. Forged signatures on document: This is a common reverse mtg scam wherein your signatures are forged on documents related to the loan. Often such scams involve paperwork where you’re asked to sign and you do so without even knowing that it has erroneous information.

At times, the lender asks you to sign on a doc saying he’ll fill up the blanks later on. Avoid signing on such papers because you don’t know what’s going to be written in the blank area and this may lead you into trouble later on. Also, check your loan statements and protect access to your checking accounts to avoid being scammed.

4. Sell products with reverse mortgage: There are companies or lenders who’d like to sell other financial products such as insurance, annuity etc with reverse mortgages. Often home improvement deals, living trusts and estate planning products are added to the reverse mortgage. In such cases, it’s quite probable that you may be scammed into a bigger loan with huge fees and the products you’ll buy may cost you a lot of dollars. Avoid going for such financial products if you don’t need them at all or else weigh out the pros and cons.

Reverse mortgages are offered specially for helping older homeowners. So, if you’d like to get the maximum benefits from the loan, watch out for the reverse mortgage scams and avoid being a fraud victim.