More homeowners age 62 or older are starting to take advantage of the multiple benefits a reverse mortgage offers them, including waiver of monthly mortgage payments and access to equity in their home. Unfortunately, as these loans have become a more popular form of financing, the ways in which older homeowners are defrauded are becoming more diverse. But the good news is that the Department of Housing and Urban Development (HUD) is constantly looking for new ways to identify and prevent reverse mortgage fraud so that older homeowners are protected.
Funds earmarked for increasing consumer protection
The new healthcare law included $777 million to put into programs that prevent elder abuse and to ensure that those responsible for mortgage fraud are punished. This is great news for all of the Protective Services programs that work every day to investigate cases of elder abuse and financial exploitation of older homeowners because they will receive specialized funding from the government. With this money, about 1,700 new elder abuse investigators can obtain funding to begin investigations and work to prevent future fraud. A new coordinating council will also be formed that will recommend innovative ways to prevent elder abuse and reverse mortgage fraud for older homeowners.
Issuing an advisory to alert homeowners of mortgage plans
The Financial Crimes Enforcement Network, along with HUD, have issued advice to alert older homeowners of common and fraudulent reverse mortgage schemes due to the prevalence of mortgage fraud by both financial institutions and, unfortunately, sometimes family members. The consultant explains the most common types of mortgage schemes used and lists potential red flags for homeowners and potential borrowers, such as cross-selling and theft involving cash-out loans. Financial institutions were required to report any fraudulent activity in suspicious activity reports (SARS) so that HUD was aware of the issues and could take further action.
Knowledge is power!
The government is taking steps toward preventing mortgage fraud and elder abuse, but homeowners can be proactive, too. The best way for older homeowners to prevent themselves from becoming potential victims of mortgage fraud is to be aware of reverse mortgages and their requirements. A homeowner can do this by doing personal research, consulting with a mortgage professional and attending a reverse mortgage counseling session with a HUD-certified financial advisor. The counseling session will tell the homeowner what to expect from the loan, as well as discuss its requirements so that there are no further surprises in the future.
Homeowners considering this type of financing should obtain more information from a loan professional who can determine their eligibility, provide them with important 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 versed in the loan process so they don’t fall victim to a reverse mortgage scheme.