What's a Reverse Mortgage Scam?

A reverse mortgage is a type of loan that allows homeowners 62 or older to access the equity in their home without having to make monthly payments. The loan is repaid when the borrower dies, moves out of the home, or sells the home.

Reverse mortgage scams are a type of financial fraud that target seniors. These scams often involve unscrupulous lenders who promise seniors a way to access their home equity without having to make monthly payments. However, these loans can be very expensive and can lead to seniors losing their homes.

Types of Reverse Mortgage Scams

There are a number of different types of reverse mortgage scams. Some of the most common include:

  • Mortgage payment relief scams: These scams target seniors who are struggling to make their mortgage payments. The scammer will offer to help the senior get a reverse mortgage, but they will charge an upfront fee for their services. In some cases, the scammer will simply take the money and disappear.
  • Home-flipping scams: These scams involve using a reverse mortgage to buy another property, fix it up, and then resell it quickly for a profit. The scammer will often guarantee that the property will increase in value, but this is not always the case. In some cases, the scammer will simply pocket the money from the reverse mortgage and leave the senior with no home.
  • Free homes scams: These scams involve targeting seniors who are looking for a free place to live. The scammer will offer the senior a free home in exchange for them getting a reverse mortgage on the property. However, the home is often in poor condition and the scammer will not actually give the senior the title to the property.

How to Protect Yourself from Reverse Mortgage Scams

There are a number of things you can do to protect yourself from reverse mortgage scams. Some of these tips include:

  • Do your research: Before you even consider getting a reverse mortgage, it is important to do your research and understand how the loan works. You should also talk to a financial advisor who can help you assess whether a reverse mortgage is right for you.
  • Beware of high-pressure sales tactics: If a lender is pressuring you to get a reverse mortgage, be wary. Legitimate lenders will not pressure you into making a decision.
  • Get everything in writing: Before you sign any paperwork, be sure to get everything in writing. This includes the terms of the loan, the fees involved, and the repayment schedule.
  • Don’t give out personal information: Never give out your personal information, such as your Social Security number or bank account information, to someone you don’t know.

If You Think You Have Been Scammed

If you think you have been scammed, there are a number of things you can do. First, you should contact the lender who gave you the loan. You should also file a complaint with the Consumer Financial Protection Bureau (CFPB). The CFPB can investigate the matter and take action against the scammer.

You can also contact your local law enforcement agency. They may be able to help you recover your money.

See Scam and Fraud Protection for 2023 for more information and make sure to Sign Up for our Scam Prevention Newsletter.

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