FBI Issues Warning About Reverse Mortgage Scams

Reverse mortgages are more popular than ever with senior citizens. But the Federal Bureau of Investigation (FBI) has issued a warning about the rise in reverse mortgage scams. The FBI says people considering these home loans should be very careful about who they do business with.

Reverse Mortgages Skyrocket
The number of reverse mortgages has jumped a whopping 1,300% from 1999 to 2008, according to the FBI. Growth in these home loans has led to more scams targeted at unsuspecting seniors. In some cases mortgage fraud is perpetrated by mortgage loan officers, investors, appraisers, developers, and real estate agents. Here are two of the more common reverse mortgage scams.

Stealing Equity
Equity theft usually occurs when scamsters find people to pose as straw buyers. The scam artist purchases the property using a straw buyer, who fraudulently states that he or she will be living in the house. Then they find a senior citizen to “buy” the property from the straw buyer, which involves transferring the deed without any exchange of money. Later the fraudster arranges for the person to receive a reverse mortgage as a lump sum distribution and they get away with the money at closing. Other folks who may be in on the scheme include the appraiser and settlement attorney.

Foreclosure Rescue
This scheme targets folks who are in danger of losing homes to foreclosure. The homeowner is approached by someone who claims they can help them qualify for a reverse mortgage. But what ends up happening is the scammer manages to get title to the person’s home, leaving them without a place to live or in the position of having to repurchase the house at a higher price.

You can avoid becoming a victim of a reverse mortgage scam by not responding to unsolicited advertisements, not signing documents you haven’t read or don’t understand, and not accepting payment for a home you did not purchase.

This entry was posted on Wednesday, July 15th, 2009 at 3:50 pm and is filed under Reverse Mortgage . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.