A “Free” House and HECM Loan

Straw buyers are people who are recruited to purchase properties they don’t actually intend to live in. When reverse loans are involved, seniors may be told they can live in a home for free. The deed to the home is then transferred to them without any exchange of money. After 60 days have passed, arrangements are made for the senior to apply for a Home Equity Conversion Mortgage (HECM). After the person receive a lump sum distribution of HECM funds, the scam artist pockets the money and disappears, leaving the victim responsible for repaying the loan.

Short Sale Fraud

Short sales have become more common as so many homeowners have lost significant value in their homes and need to sell. A short sale happens when a bank agrees to accept less than the mortgage owed from a distressed homeowner who sells a home. “Fraud occurs when a distressed homeowner finds a prospective buyer and they secretly set a low sale price. Unbeknownst to the lender, the buyer is willing to pay more for the property and the homeowner pockets the difference,” according to the FBI statement.

Kick-Backs and Mortgage Loan Modifications

Other scams in the top five involved kick-backs where home builders have a too much inventory and offer excessive incentives to buyers. The incentives are disclosed a down payments so it appears to the mortgage lender that the home has some equity. Loan modification scams occur when companies charge up to $2,000 to help distressed homeowners with their payments, but don’t keep up their end of the bargain.

The fifth mortgage scam on the list involves affinity fraud. That occurs when scam artists get the trust of people in a specific religious, ethnic, or professional group and get them to invest in some type of investment scheme.

Do Your Research First

In general, homeowners should be skeptical of any one who makes promises that seem questionable or too good to be true. It’s always a good practice to check out any unknown company or individual who wants to do business before getting involved with them. Start with your state attorney general’s office and the Better Business Bureau to check out their reputation.

Many Seniors Own Homes

Home ownership rates in the fourth quarter were highest for people 65 years and up (80.2%), and lowest for those under 35 (40.4%). Although many seniors own their homes, that doesn’t mean they aren’t struggling to hold onto them. Folks over 65 can use the following checklist to decide if a reverse loan could help them avoid foreclosure.

1. Do you want to continue keeping up maintenance and repairs on a house? Although many seniors value their independence, you may not want to be bothered with all the chores that go with being a homeowner. Selling your home and moving to a condo or apartment may be a better option.
2. Do you have much equity in your home? The more equity you have and the older you are, the more money you can borrow through a reverse home mortgage.
3. Are you and your spouse old enough to qualify for a reverse loan? If both of your names are on the deed to your home, both of you must apply for a reverse mortgage loan together. You can only do that if you are 65 or older.
4. Have you exhausted other options for keeping your home, such as assistance programs in your community, taking in a boarder, or getting other types of financial aid available to seniors?

Review Reverse Mortgage Guidelines

You can search for reputable reverse mortgage lenders here to compare quotes. Look for a knowledgeable reverse loan counselor who meets HUD guidelines.

Reverse Mortgage Pros and Cons

Reverse loans certainly have generated a vigorous debate recently over whether they are a help to seniors or the next “sub-prime disaster” waiting to happen. There definitely are cases of reverse loans gone wrong, but there also are many stories of seniors who successfully supplemented their incomes by tapping their home equity.

“Of course, I’m a senior myself and I know how many thousands of seniors are out there struggling and looking for answers. I am all for reverse mortgages and what we’re trying to do is important to me,” Graves said in the statement. “I wouldn’t put my name and reputation behind anything I didn’t believe in.”

Research Reverse Loans Carefully

Graves also said that reverse mortgages are not a solution for everyone. He also said that before he became the spokesperson for the company, he also misunderstood some of the benefits and features of reverse home mortgages. He says anyone interested in learning more about reverse mortgages should do their research and look for reputable lenders to get quotes.

It’s also important to remember that regardless of who the celebrity spokesperson is for a reverse loan firm or other type of company, you should never sign up for a product or service without fully evaluating whether or not it is right for your situation. Borrowing money through a reverse loan is a big decision to make, and no matter who endorses it, it’s your financial future that is being impacted.

Las Vegas Foreclosures

Las Vegas had the highest rate of foreclosures for a metro area with a population over 200,000; 12% of its housing units receiving a foreclosure notice in 2009. No. 2 on the list was Cape Coral – Ft. Myers, Fla., followed by Merced, Calif. Although it isn’t surprising that cities in these states continued to struggle with housing, the RealtyTrac data shows that other areas are starting to be affected by more foreclosures.

Unemployment Contributes to Foreclosure Rates

“There is evidence that we’re entering a new wave of foreclosures, driven more by unemployment and economic hardship than what we’ve seen over the past few years,” James J. Saccacio, chief executive officer of RealtyTrac, said in a statement. “Areas like Provo, Utah, Fayetteville, Ark., Portland, Ore., and Rockford, Ill., all posted foreclosure rates above the U.S. average in 2009. And markets like Honolulu, Minneapolis, and Seattle saw foreclosure activity increase at more than twice the national pace over the past 12 months — although all three of those markets still had 2009 foreclosure rates that were at or below the U.S. average.”

Reverse Home Mortgage Can Help

For seniors who are struggling to make mortgage payments or facing the threat of foreclosure because they can’t pay their property taxes, a reverse mortgage could help. A reverse loan can supplement a fixed income and keep you in your home. The money doesn’t have to be repaid until you move or die.

Gather quotes from several lenders to find the best reverse mortgage for your situation. After reviewing reverse mortgage guidelines and comparing quotes, you should be in a better position to decide if one of these loans can keep you from becoming another foreclosure statistic.

Will the Bank Own My Home?

When you borrow a reverse loan the bank does not own your home. You continue to hold the deed to your house and are responsible for paying property taxes and insurance. Home improvements and repairs can be made as needed, and you can leave your home to your kids as an inheritance.

Can I Take a Reverse Mortgage with My Spouse Even though I Am Under 62?

No, you cannot. Reverse mortgages are only available to people who are 62 and up. However, if your spouse meets the age requirement, he or she can apply for a reverse loan. Your name would have to be removed from the deed to your home in order for your spouse to take on a reverse mortgage. Upon your spouse’s death, the reverse mortgage would have to be repaid if you wanted to stay in the home.

Does My Home Have to Be Paid Off to Qualify for a Reverse Loan?

Your house does not need to be completely paid off. If you have equity in your home you may be able to get a reverse loan. The amount of money your receive is based on the amount of that home equity, your age, and current interest rates.

Are Reverse Mortgages Only Available to Low Income People?

You can apply for a reverse mortgage no matter what your income is. It is true that many seniors who apply for reverse mortgages do so because they need to supplement their income so they can pay bills. But even if you have a healthy retirement account and aren’t struggling financially you can choose to get a reverse loan.

Get free, no commitment reverse mortgage quotes from a trusted network of lenders.

Can a Reverse Loan Help You Stay in Your Home?

You may be facing the threat of foreclosure and looking for any number of possible solutions. If you are over 62, a reverse mortgage could be helpful. Talk with a reverse loan counselor to discuss your options and to determine how much you might be able to borrow. There also may be other alternatives to getting a reverse home mortgage that may help your situation.

Avoid Foreclosure Any Way You Can

In the meantime, consider the following tips to avoid foreclosure.

• You must continue making payments on a mortgage. Once you continue to miss payments your mortgage lender may move to repossess the home, forcing you to move.
• If you owe more on your property than it is worth when you default, the mortgage lender could pursue a deficiency judgment. Not only would you lose your home, but you could end up owing additional money.
• Open all correspondence from your mortgage lender and do not ignore phone calls. There may be a way to work out a new payment plan, loan modification, refinance, or some other solution to your problems.
• Do not abandon your home. Strategic defaults have become more common, and accounted for a quarter of all defaults in 2009, according to U.S. News & World Report. It’s a bad idea to walk away from a property because it’s worth less than what is owed on a mortgage for many reasons, including the fact doing so guarantees you’ll have a horrible credit history for many years.

Do whatever you can to stay in your home. If staying there is impossible, work like crazy to sell it rather than go down the road to foreclosure.

Reverse Mortgage Money Needs to Stretch

Before even getting down to the business of home improvement, it’s important to note that you should never spend reverse mortgage money without first sitting down and budgeting it. Withdrawing equity from your home is a big deal, so it’s imperative that you really think about how to best use reverse loan money. Avoid using your funds for unnecessary projects and instead focus on improvements that can help you live comfortably in your home as you age. Here are a few repairs you may want to consider.

Replace Old Windows

Rickety old windows can be a drain on your energy bill. High heating and cooling bills can really burden a person with a fixed income. However, before you write a check from your reverse mortgage funds, check with agencies that work with seniors in your community to see if they have any programs that help seniors with this type of home improvement. Also, look into getting a free energy audit of your home through your local utility to find out exactly where heat is being lost in your home.

Preventing Slips and Falls

Broken walkways and stairs can be a hazard for anyone, especially elderly people. Getting in and out of your home safely is important, so using reverse mortgage money to make these repairs can help you avoid falling and running up huge medical bills. Installing rails in the bathtub or shower can also prevent slips and falls. Look around your home to pinpoint areas that you can make safer.

Make smart decisions about using reverse mortgage money so that you can continue to live in your home independently. Look for reverse loan quotes here to decide if this type of loan can help you.

What Is Debt Settlement?

Settling debt has become more common as the economy has struggled. Debt settlement occurs when a creditor agrees to accept less than what you owe on credit cards, medical debt, or loans. Generally, you have to offer some kind of lump sum payment or work out a payment plan. When you work with a debt management firm it may require that you make monthly payments into an account with their company. Once you’ve accumulated enough money, the funds are used to pay off the negotiated amount you owe.

You Can Settle Debt Yourself

You’ve probably seen ads for debt settlement companies that offer to negotiate with creditors. But most people can actually negotiate with their creditors themselves. If you choose to use a debt settlement firm, take the time to check out their reputation before signing any contracts. Be leery of putting funds into an account not controlled by you. Avoid using companies that require you to make large upfront payments, or advance fees, to use their services.

Reverse Mortgages and Debt

Some seniors successfully use reverse home mortgages to pay off debt. Before you go this route, have a housing counselor discuss reverse mortgages pros and cons. While you can use the proceeds from a reverse loan for paying off debt or any other purpose, it’s important to look at all your options to decide if this is the smartest move for your situation. You can get an idea of how much money you might be able to borrow with a reverse mortgage here.

Reverse Mortgages Help Homeowners Stay Independent

Many seniors fear losing their independence as they age. A reverse home loan is a tool that can help you stay in your home and avoid being financially dependent on family members. The money, paid as a lump sum or in installments, can be a lifeline if you have a fixed income.

HECM Can Be Used to Purchase Home

The Home Equity Conversion Mortgage (HECM) can be used if you want to downsize or relocate. You can use reverse loan proceeds to buy another house as long as it is going to be your principal residence. The money can’t be used for a vacation home or investment property.

Reverse Mortgages for the Undecided

Even if you don’t know if you want to stay in your current home for the long-term, a reverse mortgage could still be useful. Among the reasons you might need access to cash are to repair and upgrade your home if you think you might sell, to purchase a long-term care policy, or to consolidate debt. Of course you aren’t limited to those particular uses. A reverse mortgage can be used for any purpose.

Shop around and compare reverse mortgage quotes to get an idea of how much you might be able to borrow. The older you are and the more your home is worth, the more reverse mortgage money you would qualify to borrow.

The broker led the woman to believe the money was being invested in annuities. After he deposited the money in his account, he sent her $500 “dividend” checks each month. She became suspicious when she noticed that the checks were coming directly from the reverse mortgage broker and not an insurance company.

The case isn’t isolated and highlights the potential for various types of reverse mortgage fraud. Here are some of the reverse mortgage scams to watch out for:

• Getting seniors to pay for information that is actually provided free by the Department of Housing and Urban Development (HUD). It’s not uncommon for seniors to be charged 6% to 10% of the amount borrowed for a reverse mortgage as part of an estate planning program.
• Stealing home equity from seniors. This may involved flipping homes and using seniors to pose as straw buyers, or people who apply for a reverse mortgage to take out all the equity before the home is then resold to another buyer.
• Some equity-stripping schemes involve offering free homes to seniors or foreclosure assistance to supposedly help them stay in their homes. Many times these scams are targeted at people through churches, investment seminars, TV and radio ads, or direct mail, according to the Federal Bureau of Investigation.

To avoid being taken in by fraud, always be skeptical of claims that sound too good to be true. Avoid doing business with companies you’ve never heard of or who contact you and pressure you to sign up for their products on the spot. Never sign documents that you don’t fully understand. Have an attorney review the paperwork with you if necessary.