What Is a Reverse Mortgage?

Reverse mortgage fraud is often perpetrated on the poor and elderly, as attorneys representing plaintiffs in mortgage loan fraud cases will attest. This type of lending puts accumulated home equity and long term savings of the most vulnerable members of our society at risk.

What is particularly disconcerting about this form of mortgage fraud is that lenders provide financial incentives to brokers to find customers for reverse mortgages. The lenders and the brokers make money while consumers often lose their homes and their heirs lose inheritance. By some estimates, this is one of the types of bad loans that can drag down an economy overall.

Reverse mortgages are not illegal. And under some circumstances, they might make sense for some borrowers. The way they work is they allow property owners age 62 and up to collect money borrowed against the equity in their homes. While you must continue to pay property taxes and insurance, the money you receive is not taxable as income, and it does not affect your eligibility for Social Security or Medicare benefits. When the value of the home is depleted, or the homeowner passes away, the title to the home reverts to the lender.

Unfortunately, the loans and the title transfer often come sooner than expected, leaving the individual homeless.

Deceptive marketing practices to avoid

How does a homeowner become a victim of this fraudulent type of lending? Often, it begins with deceptive marketing:

• Give us your phone number. Scams ask potential borrowers for contact information.

• Act now! Bogus deadlines force quick decisions.

• Looks like it is from the government. Postcard mailings or other advertising promises something that seems government related, such as a government program for seniors.

• This may solve another money problem you have. The advertisement also promises free information on how to pay off existing debts such as credit cards or the mortgage itself.

• Your life will improve with this money. Some promotions even say the funds can be used for home repairs, renovations, travel, and funeral home pre-payments.

• Reverse mortgage? What reverse mortgage? The actual words, reverse mortgage, are often not used in the promotion. Instead, the promotion may compliment you for being responsible enough to own a home and say that only people like you qualify for this special type of loan.

There are reputable sources of reverse mortgages, including the federally insured Home Equity Conversion Mortgages. In almost all cases, a reverse mortgage is most appropriate for older people who have a pressing need for cash that cannot be met in another way.

We can help when you have been victimized by deceptive marketing

The Hershewe Law Firm assists individuals and families who have been victimized by reverse mortgages and other types of mortgage lending fraud. Call 877-382-9734 or contact us online today for a free consultation about your case.