The COVID-19 pandemic has affected many Americans’ financial and retirement plans. If you’re a homeowner over age 62, you may be thinking about a reverse mortgage. A reverse mortgage is a loan that allows older homeowners to use the equity in their homes. Unlike a traditional mortgage, there is no monthly mortgage payment, and the loan is usually repaid when the borrower sells or no longer lives in the home.
As a result of the economic uncertainty caused by the COVID-19 pandemic, scammers may be targeting older homeowners through reverse mortgage schemes. These schemes can include:
A trusted family member or caregiver coercing an elderly homeowner into applying for a reverse mortgage loan or impersonating their elderly relative during the loan process.
Using an older homeowner’s identity, Social Security number, or other personal information without his or her knowledge to get the loan money.
Tempting reverse mortgage borrowers to use loan money to make a “can’t miss” investment or to take out a reverse mortgage to pay for high-cost repairs or improvements to the home.
Trying to convince the reverse mortgage borrower to sign a power of attorney that gives the scammer sole access to the reverse mortgage loan money.
Unfortunately, many older homeowners do not realize they have been scammed until the loan money is gone. Scammers often target older adults through community organizations; investment seminars; and television, radio, billboard, and mailer advertisements.
These tips can help you avoid a reverse mortgage scam or problem:
Don’t get a reverse mortgage just because a contractor says that’s the best way to pay for expensive repairs or home improvements.
Reverse mortgage loan officers are not allowed to sell you investments or other financial instruments. Don’t plan to buy an annuity or make other investments with the money from a reverse mortgage.
Talk to a few lenders before you decide to take out a reverse mortgage. If a lender says they are the only person you should talk to, that’s a warning sign, and it could be a scam.
To learn if a reverse mortgage loan is right for you, talk with a reverse mortgage counselor. To find a HUD reverse mortgage counselor in your area, search HUD online or use its interactive voice system at 800-569-4287.