As more and more baby boomers head toward retirement, numerous countries including the U.S. are facing the challenges of an aging population. Among the difficulties being addressed is the lack of sufficient financial resources to comfortably sustain a senior citizen in the final years of life. Individuals and governments alike are feeling the economic crunch of elder care. One solution that many are availing themselves of is the reverse mortgage.
There are important similarities and differences between a reverse mortgage and a second mortgage. Both give borrowers access to the equity they have built up in their homes by offering loans using the home as collateral. What makes the reverse mortgage unique, and the reason why it is only offered to seniors, is the fact that there is no need to make any payments on the loan as long as the borrower is alive and living in the house. Property taxes, homeowner’s insurance, and maintenance fees, if applicable, must still be paid regularly. The principal plus interest continue to grow until the borrower moves out or dies, at which point the entire loan comes due at once.
Unfortunately, reverse mortgages are prone to fraud, and many seniors have lost their homes as a result. This is an especially pernicious crime, targeting as it does a particularly vulnerable population with little recourse to defend itself.
One common tactic used by scammers is to aggressively market reverse mortgages to people who either don’t need them or don’t qualify for them. The victims are often told that the loans are risk-free, or even an entirely free way to access lots of money without ever having to pay it back. Some seniors have even been convinced to take out a reverse mortgage to pay for a cruise or some other non-critical expense.
Other times the loan is used to pay for needed home repairs, but the lender gets the borrower to agree to use a “recommended” contractor who either does shoddy work or never even shows up at all. This is exactly what is alleged to have happened in the case of two New Jersey home contractors arrested in 2019. The indictment accused them of using purposefully inflated home appraisals to secure bank loans that their victims would never be able to repay. They also fraudulently had the loan money deposited into bank accounts that they controlled, rather those of the borrowers. The victims of these crimes are the senior citizens, as well as the lending banks.
In other cases, where it’s the lender that is perpetrating the scam, the home may be purposely undervalued in order to minimize the eligible amount. Sometimes, the homeowner is pushed into leaving the spouse’s name off the loan. In this case, when the owners die, the spouses are left destitute, with a massive loan that needs to be instantly repaid, or else be evicted from their family home at the most fragile time of life.
If you think you’ve been the victim of a reverse mortgage scam, contact the fund recovery experts at MyChargeBack.