Home Equity Conversion Mortgage (HECM), also known as, a reverse mortgage is a financial tool for senior homeowners who want to access the equity in their homes without having to take-out an actual home equity loan or a second mortgage. This can be an excellent opportunity for seniors, who meet the qualifications and needs, to gain control of their financial lives. This is also an excellent opportunity for individuals of low character to take advantage of those seniors through reverse mortgage scams. A reverse mortgage scam is often committed by groups of individuals working together to steal the equity of unsuspecting homeowners. This scam usually ends with homeowners losing their homes or a large debt being passed to their heirs. Of all the reverse mortgage scams the most popular and common are the Foreclosure Rescue Scam, the Free Home Scam, and the Investment Scam.
With the Foreclosure Rescue Scam, con-artist target seniors who are struggling to pay their mortgage and maybe at risk of losing their homes to foreclosure. The con-artist has an inflated home appraisal performed by an accomplice. The con-artist then works with the homeowner to obtain a reverse mortgage. During this period, the homeowner is convinced to transfer the title to the con-artist. Once the title is transferred, the homeowners is evicted from the home without gaining access to the reverse mortgage funds.
In the Free Home Scam con-artist recruits seniors to live in a home; only requiring them to pay taxes and maintain regular up-keeping. The senior is then required to take out a reverse mortgage again using an inflated appraisal. The funds are then given to the con-artist. When the senior passes away, the reverse mortgage lender is stuck with a loss due to the lack of true value in the home.
The Investment Scam is a simple scam that involves the con-artist presenting his or her target with an excellent investment opportunity with promise of huge returns. The con-artist convince the homeowner that a reverse mortgage is an great way to obtain the funds to pay for the investment. Once the con-artist receive the money, he or she informs the homeowner that the investment didn't workout; never to be heard from again.
These are just a few of the scams associated with reverse mortgages. To prevent being a victim, seniors need to avoid solicitation from any organizations that their are not familiar with and research the background of any unknown organization through the Better Business Bureau before completing any financial transactions. For a list or more information about the above mentioned scams and other frauds, readers can search the Federal Bureau of Investigation or the United States Department of Housing and Urban Development websites.
This is a great "enhancement" post that builds on the ideas of your previous post but that also acts as a "stand alone" post for readers to gain more knowledge of real estate scams. I wonder: how often do these scam-artists get caught? At any one time, how many of these scams are in action across the U.S. Is this a number we should really worry about (that is, is the number in the thousands or tens of thousands?).
ReplyDeleteYour advice at the end of the post is very good...