Reverse Mortgage Scams. I recently posted a blog article on this subject including my lastest video, "Reverse Mortgage Scams". Today I see the headline: Surviving Spouses Sue HUD Over Reverse Mortgage Rules in a Class Action Lawsuit and this is one scam I neglected to mention in my video and technically in may not be a "scam" but for all intents and purposes in my book it is just that.
This article in the US Post reminds me of yet another scam that can be perpetrated on unsuspecting seniors when considering a reverse mortgage. The loan amount on a reverse mortgage is calculated based upon 3 factors: Age, Current Expected Rate, and Home Value. The older a borrower is, the more cash they can recieve from a reverse mortgage. Another part to that story is, the more money the borrowers take the more money the lender makes and possibly a higher commission to the loan officer.
Perhaps the borrowers had a large traditional mortgage to payoff and the reverse mortgage would not loan enough if the younger spouse was included on the new reverse loan. So they decided to risk taking the younger spouse off of title so that they could payoff the current loan with the new reverse. Sounds okay, right? Wrong!
If the older spouse dies and they are the only one on title and on the loan, guess what? The loan is due and payable in full! What kind of position does that leave the surviving spouse in? A bad one!
Were they fully and carefully disclosed the dangers of going off of title when they obtained the reverse mortgage? If so, did the loan officer request that they hand write a letter in their own words explaining that they understood the risks they were taking and that they might be foreclosed upon and evicted if they could not payoff the loan upon the death of the older spouse? I doubt it. Who would willingly take on that risk?
In my practice, if one spouse is too young to qualify for a reverse mortgage, my advice to the couple is to just keep on doing what they are doing now, even if it is a struggle to make their current mortgage payments or to sell their home. I have a relationships with several qualified, ethical Realtors® to refer them too should they want to pursue selling. Even so, time goes by so fast that if they stick it out with their current mortgage it will be no time at all before the younger spouse is 62 and they can look again at a reverse mortgage knowing that both spouses will be protected.
Taking out a reverse mortgage in the name of the older spouse only is risky and foolish. There are very few instances when it would make any sense at all. Can you think of any?
Anytime you consider taking out a mortgage, reverse or otherwise, be sure you completely understand the terms, obligations and risk you are undertaking. Do not be rushed and read the documents yourself. Do not just sign what's put in front of you without reading it. (This reminds me of another pet peeve - Why are there so many documents to sign? They are redundant and overwhelming, the sheer volume of printed works hides and masks the terms, conditions and dangers. IMHO.)
If you would like to know what you AND your spouse would qualify for on a reverse mortgage please click HERE and fill out the easy form to receive a Personalized Reverse Mortgage Analysis
By Deborah Nance
Your Local Southern California Reverse Mortgage Professional
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iReverse Home Loans, LLC, NMLS#810502 originates reverse mortgages in Alabama, Alaska, Arizona (MB-0919584), California, Colorado, Connecticut, Florida, Illinois, Indiana, Iowa, Kansas, Louisiana, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, Nevada, New Jersey, New Mexico, Ohio, Oregon (ML-5378), Pennsylvania, South Dakota, Tennessee, Texas, Utah, Vermont (1164-MB), Virginia, Washington and Wisconsin.
Important Information: Reverse Mortgages are neither "endorsed" nor "approved" by the Federal Government. The FHA (Federal Housing Administration) provides certain insurance benefits for lenders and borrowers in connection with the lender’s HECM loans; the FHA does not make or originate loans. The owner(s) retain title to the property that is the subject of the reverse mortgage until the person sells or transfers the property and is therefore responsible for paying property taxes, insurance, maintenance and related taxes. Failing to pay these amounts or failure to maintain the condition of your property may cause the reverse mortgage loan to become due immediately. A reverse mortgage is a complex loan secured by your home. Whether such mortgage makes sense for you depends on your financial situation and needs. For these reasons, we strongly recommend that you consult with a qualified independent housing counselor, family members and other trusted advisers before making this decision. This website is not from HUD or FHA and was not approved by HUD or any government agency.