In some of the most common reverse mortgage scams, the FBI says that homeowners are made lofty promises. These include: free homes, investments, refinancing assistance, and more. And common advertising gimmicks include: media ads, mailed ads, seminars, and even door-to-door salespeople.
Becoming a victim of a reverse mortgage scam can have lasting effects on your life. For starters, you can be swindled out of the equity you worked so hard to accumulate. You can also be left with a destroyed credit rating and even lose your home. Fortunately, there are a number of red flags that will help you avoid scammers who are out to defraud you.
Here are four:
- You are not allowed to choose your reverse mortgage counselor -- This is the surest sign of ill-intent. HECM (home equity conversion mortgage) borrowers are required by federal law to enter into counseling sessions before they can apply for a reverse mortgage. But scammers don't want you to know what your rights are. If you are told you can skip counseling, or are only referred to the lender's preferred counselor, the chances are good that you're dealing with a crook.
- The lender tries to make your appointments for you -- Another key sign of a reverse mortgage scam, according to the FBI, is a lender who makes appointments on your behalf. You have to make these appointments yourself. Even if you are offered a list, a lender can make an appointment for you to a counselor that is part of their gimmick. So tread carefully.
- The lender tries to get money from you right away -- If you have not yet made your counseling appointment and gone through with it, it's against the law for a lender to take ANY money from you. In fact, it's unlawful for the lender to do anything with your application until you have a certificate of attendance from your counseling sessions that is signed by your counselor.
- Loan insurance is sketchy -- By law, it should be clear who is insuring your HECM loan. They can only be insured by the Federal Housing Administration and no other agency or entity. If that name is not prevalent on the documents, it's a sure sign of a reverse mortgage scam.
Most lenders are legitimate. Make sure that yours is, too, and you can proceed with your reverse mortgage in confidence.
This article originally appeared on NowItCounts.com.
Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.