Mortgage Scheme Fraud

Due to the pandemic that hits the whole world unexpectedly, so many people lost their jobs and that has increase the rate of crime in the country. Crimes such as mortgage fraud and scams have increased dramatically. People will do anything to make extra cash these days; including praying on troubled homeowners who are facing foreclosure.

Although the federal and state governments have made several offers available to help individuals through these difficult times, many still indulge in fraud activities.

Reverse mortgages appeal to senior homeowners — and reverse mortgage scammers — because they offer the opportunity to borrow money without making a monthly payment. If you’re 62 or older and thinking about getting a reverse mortgage, be aware of the warning signs of reverse mortgage fraud.

Reverse mortgages are becoming more popular as a retirement planning tool for homeowners, allowing them to access their home equity in various ways. Scammers have additional opportunities to target aging seniors with reverse mortgage frauds as they become increasingly socially isolated. Knowing the warning signs of these scams might help you or a loved one from being duped by con artists.

1. Investment strategy for reverse mortgages
   HOW IT WORKS: A salesperson tries to persuade you to use your reverse mortgage for estate planning and put the money in a high-yielding insurance product or annuity as part of your estate.
   WHY IS IT BAD: The investments could be fake, or the financial advisor could charge exorbitant fees. The council fails to mention that the returns may not be enough to cover the monthly mortgage interest costs on the reverse mortgage loan debt.

2. House-flipping
   HOW IT WORKS: The con artist proposes using the money from a reverse mortgage to buy another house, fix it up, and resale it for a profit.
   WHY IT’S BAD: The individual pitching this plan may promise that the property’s value would rise. Real estate agents and mortgage loan officers may work together to create commission money from the purchase and sales of the home, regardless of whether or not the reverse mortgage borrower makes a profit.

3. Schemes for home improvement
   HOW IT WORKS: A person knocks on your door and offers a free handyman consultation. The examination reveals costly repairs, and the con offers to pay for them with a reverse mortgage. The reverse mortgage loan officer may be a part of the scheme to earn a commission on the reverse mortgage.
   WHY IT’S BAD: The repair expenses are frequently exorbitant, and if the borrower refuses to pay, the handyman may register a lien on the property. These con artists presume that the homeowner would not contact local contractors to confirm the work’s necessity or look into other home renovation financing possibilities.

4. Relief from mortgage payments
   SCAMMERS PREY ON LOW-INCOME SENIORS WHO ARE STRUGGLING TO MAKE HOUSE PAYMENTS OR PAY MEDICAL BILLS. They may use advertising themes like “stop foreclosure now” or “100% money-back guarantee” to entice victims, and they may charge an upfront nonrefundable fee to expedite the approval procedure.
   WHY IS IT BAD: The company could collect the money upfront and disappear before providing the promised services, or they could offer a service that involves paying your bills for you. You provide the money and the payment information to them, but the scammer keeps the money, and the invoices get unpaid.

5. High-pressure sales techniques
   HOW IT WORKS: A reverse mortgage loan officer may try to persuade you to use a “special” reverse mortgage loan program that isn’t guaranteed by the Federal Housing Administration (FHA), claiming that the expenses are lower, the loan is easier to approve, and you’ll get your money sooner.
   WHY IT’S BAD: The loan officer could be promoting a proprietary reverse mortgage product that lacks the FHA’s home equity conversion mortgage (HECM) program’s protections. By requiring a consultation with a registered and professional Housing and Urban Development (HUD) counselor, HECM loans protect elders from this type of sales pressure.

6. Fraud committed by family
   RELATIVE PRESSURE: Relatives press elderly family members to take out a reverse mortgage and use the equity for their own needs rather than the senior homeowner’s best interests. According to the Consumer Financial Protection Bureau, family members may even impersonate an older relative throughout the loan procedure.
   WHY IS IT BAD: Instead of inheriting riches, family members may take advantage of physically or psychologically challenged relatives. They might even persuade the homeowner to sign a power of attorney, giving them sole access to the funds from the reverse mortgage loan.

7. Reverse mortgages for military veterans
   HOW IT WORKS: A reverse mortgage lender purports to offer special conditions to military veterans or suggests the U.S. Department of Veterans Affairs. Reverse mortgages are backed by the Department of Veterans Affairs (V.A.).
   WHY IS IT BAD: The Veterans Administration does not offer or support any reverse mortgage programs. Advertisements frequently suggest that their reverse mortgage products are linked with the V.A. to lure military families.
   You have the right to cancel a reverse mortgage if you know what you’re doing.
   Even if you complete the entire reverse mortgage loan process, you retain the ability to cancel your application. This is known as your right of rescission, and it usually allows you to rescind the papers with written notification three days after you sign them. If you don’t agree with any of the terms, the lender cannot force you to sign the closing documents.

What to do if you’re a victim of a reverse mortgage fraud

The Federal Trade Commission (FTC) recommends filing a complaint if you suspect reverse mortgage fraud. It would be best if you made a written complaint concerning reverse mortgages with your state’s attorney general’s office, the banking authority in your state, or the Federal Trade Commission. If you believe the lender you’re working with is legitimate, but one of their representatives is misbehaving, you should inform the lender.

If you suspect a reverse mortgage scam, report it even if you didn’t fall for it. Other homeowners will not be harmed if fraudulent operations are shut down.