Top Three Reverse Mortgage Scams

1) Charging for Free Reverse Mortgage Information

Reverse Mortgages are more complicated than the average mortgage loan. Knowing that, some con artists offer - for a fee - reverse mortgage information and services that are available to consumers at no charge. For example, some senior homeowners have been contacted by firms offering to assist them in finding a reverse mortgage lender, in exchange for a percentage of the loan. This type of arrangement should always be avoided.

HUD provides this information without cost, and HUD-approved housing counseling agencies are available for free, or at minimal cost, to provide information, counseling, and free referral to a list of HUD-approved lenders. Call 1-800-569-4287, toll-free, for the name and location of a HUD-approved housing counseling agency near you.

2) Downplaying Pre-Loan Counseling or Not Providing It

An educated borrower is the scam artist's worst enemy - but it’s up to the borrower to educate themselves and take advantage of counseling and other opportunities to learn about reverse mortgages. All three major reverse mortgage programs - HUD HECM, Fannie Mae’s Home Keeper and Financial Freedom - require potential borrowers to have counseling with an independent counselor specially trained in reverse mortgages before taking out a loan.

It is always best to meet face-to-face with the counselor. If the person you’re working with offers to waive the counseling by asking a few simple guestions, be on your guard. The scam artists may not tell you how much your eligible for and pocket the difference.

3) Forgery

Forgery is a key part of many scams. In one case, the lender requested the title company to prepare two checks payable to the homeowner: one for $61,000 which the homeowner received and a second one for $42,000 which the corrupt lender endorsed with a forged signature and deposited into his own account.

To protect yourself, never sign documents with blanks to be filled in or corrections to be made later. Carefully protect access to your checking and other accounts. Review and reconcile checking account and loan statements regularly. If you find something suspicious, contact your financial institution immediately.