We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Finance

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What Are the Different Types of Reverse Mortgage Scams?

Malcolm Tatum
By
Updated: May 17, 2024
Views: 4,714
Share

While reverse mortgages are a great way of creating a steady revenue stream during the retirement years, a number of reverse mortgage scams are found online and offline today. These scams usually make money by using a series of questionable tactics to gain control of the properties involved, in some cases evicting the homeowners. While there are many different types of reverse mortgage scams, most of them are variations on three basic models: foreclosure flipping, reverse mortgage repair scams, and even counseling scams on the front end of the decision to take out a reverse mortgage.

When it comes to reverse mortgage scams, one of the more effective approaches involves providing consumers with counseling that is aimed more at promoting a specific scam operation than helping consumers understand their options with obtaining a reverse mortgage. While a reputable counselor will focus on helping consumers to evaluate their circumstances and explore the benefits and possible drawbacks to this type of financial arrangement, scam counselors focus only on potential benefits, with little to no attention to how those benefits may or may not relate to the consumers. A scam counselor is also likely to quickly focus in on no more than one or two programs that are promoted very heavily, pointing out how those programs offer everything that has been discussed up to that point.

Con artists may also use the counseling phase as a way to create barriers between consumers and other reverse mortgage options that are actually better choices. This is often done by denigrating specific programs, calling attention to certain fees or other terms of those programs that are not included in the one being touted by the counselor. As with any business situation, attempting to sell a product by denigrating the competition is usually a sign that something is wrong, and that the so-called great deal should be passed over.

Along with counseling, the foreclosure flip is another common model for reverse mortgage scams. With this approach, the idea is to include terms in the contract that provide ample opportunity for the scammers to use some minor excuse to lay claim to the property, initiate a foreclosure, and put the home up for sale. At that point, the consumer must either come up with the financing to buy back the home, or seek living arrangements elsewhere. In either situation, the financial resources of the consumer are drained, leaving little to nothing for his or her remaining years.

Reverse mortgage scams can also take on the guise of a property upgrade or repair strategy that ultimately leaves the homeowner with little to nothing in the way of assets. Here, the idea is to convince the homeowner that some upgrades to the property are necessary in order to get the best deal on the reverse mortgage. Once this is done, it becomes clear that the upgrades did nothing to improve the terms of the mortgage. Instead, the repairs lined the pockets of those who managed the repairs, usually a partner of the reverse mortgage counselor. This leaves the homeowner with so-called enhancements that he or she may not have wanted in the first place, and were probably not needed.

Since reverse mortgage scams can be multi-layered, all three of these basic approaches may be combined into what appears to be a very good deal. Consumers can protect themselves by refusing to deal with providers who balk at having their contracts reviewed by an attorney, who place strict time limits on the offers, and who generally try to hurry consumers so they don’t have adequate time to make a decision. It is important to be wary of unsolicited advertisements, pressure sales tactics, and programs that herald no down payment only to include a range of fees and charges throughout the duration of the contract. When in doubt, let the opportunity pass and focus attention on lenders who are more willing to work with consumers at their own pace.

Share
WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including WiseGeek, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.

Editors' Picks

Discussion Comments
Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
Share
https://www.wisegeek.net/what-are-the-different-types-of-reverse-mortgage-scams.htm
Copy this link
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.