More homeowners ages 62 and older are starting to take advantage of the multiple benefits a reverse mortgage has to offer them, including the elimination of monthly mortgage payments and access to their home equity. Unfortunately, as these loans become a more popular form of financing, the ways in which older homeowners are being defrauded are becoming more diverse. But, the good news is that the Department of Housing and Urban Development (HUD) is continuously finding new ways to identify reverse mortgage fraud and prevent it so that older homeowners are protected.
Funds Set Aside for Increased Consumer Protection
The new health care bill has included $777 million to put toward programs that work toward preventing elder abuse and to ensure that those who are responsible for mortgage fraud are justly penalized. This is great news for all of the protective service programs that work each day to investigate cases of elder abuse and the financial exploitation of older homeowners because they will be receiving specialized financing from the government. With this money, an estimated 1700 new investigators of elder abuse can receive financing to launch investigations and work toward preventing future fraud. A new coordinating council will also be formed that will recommend innovative ways to prevent elder abuse and reverse mortgage fraud of older homeowners.
Advisory Issued to Alert Homeowners of Mortgage Schemes
The Financial Crimes Enforcement Network, along with HUD, has issued an advisory to alert older homeowners of common reverse mortgage schemes and fraud due to the prevalence of mortgage fraud by both financial institutions and, unfortunately, sometimes family members. The advisory explains the most common types of mortgage schemes being used and lists potential red flags for homeowners and potential borrowers to watch out for, such as cross selling and theft involving cash-out loans. Financial institutions have been asked to report any reverse mortgage fraudulent activity in their Suspicious Activity Reports (SARS) so that HUD is aware of the problems and can take further action.
Knowledge is Power!
The government is taking steps toward preventing mortgage fraud and elder abuse, but homeowners can be proactive as well. The best way for older homeowners to keep themselves from becoming potential victims of mortgage fraud is to be knowledgeable about reverse mortgages and their requirements. A homeowner can do this by conducting personal research, consulting with a mortgage specialist and attending a reverse mortgage counseling session with a HUD-approved financial counselor. The counseling session will tell the homeowner what to expect from the loan, as well as discuss its requirements so that there are no surprises further down the road.
Homeowners considering this type of financing should get more information from a loan specialist who can determine their eligibility, provide them with important reverse mortgage information and answer any questions they may have. This type of loan can be a great financial solution for homeowners as long as they are well informed about the loan process so that they do not fall victim to a reverse mortgage scheme.