Some Reverse Mortgage Stumbling blocks to Stay away from
Getting a reverse mortgage is no longer seen as a terrible thing by most financial advisers
. But that doesn't mean that everyone agrees. For with an ample supply of reverse mortgage applications comes an ample supply of tricksters who have no problem taking advantage of these unsuspecting borrowers.
Few consumer transactions involve more money than mortgage loans. Naturally then, mortgage transactions are very tempting to scammers. To give you an idea, here are a few of the more popular tricks used:
1. Products and/or services that are not necessary for the loan such as living trusts and burial plots are sold with the loan itself as part of a package. The loan officer leads the borrower to believe that he or she must buy one of these products to be eligible for a reverse mortgage.
2. Even though guidelines make it mandatory that borrowers receive counselling from an independent HECM counsellor this requirement will be downplayed by the loan officer. In-person counselling is strongly advised by HUD. Scammers will work with phone-based agencies who charge borrowers for services that are supposed to be free. As a result of not having been properly counselled these borrowers feel they have no choice but to give up large sums of money.
3. Bogus documents and forged signatures are used to steal money from the loan. The escrow agent draws up 2 seperate checks. The borrower gets a check for less than the full amount and the loan officer gets the remainder.
While these scams good reason for caution, there are are whole host of concerns that have no basis in reality. The maturity date of the loan is a concern. Losing their home because that can't repay the loan is a very real concern for many seniors. So long as the home remains the primary residence it cannot be lost to the bank. And in the event that the borrower lives beyond the date of the last payment there is still no possibility of losing the home. Also, the fact of a lien against the property is irrelevant when it comes to inheritance. Only the amount owed on the loan affects inheritence. The total amount owed on the loan is the only thing that gets subtracted from the equity inherited by the heirs. This remainder is available to the borrower's heirs.
In conclusion, the reverse mortgage industry has grown beyond what anyone ever foresaw. What was once considered ill-advised has now gained widespread acceptance by most financial advisors. Sure, caution is advised for any reverse mortgage borrower. But considering all that stands to be gained it is a goal worth pursuing when one's life circumstances warrant it. Improvements in existing laws can help prevent scams from being perpetrated. Dur dilligence and education is the best defense against these dangers.
Some Reverse Mortgage Stumbling blocks to Stay away from