A Wall Street Journal article on August 27, 2009 reports on a retired auto mechanic who took out a “reverse mortgage” for $94,000. The homeowner understood that $70,000 would go to pay off a mortgage owed to Bank of America, and that he would receive $24,000 in cash to use any way he wanted. He received and spent the $24,000 in cash. He thought his mortgage had been paid off, but it wasn’t. Instead, the mortgage scammer who handled the transaction arranged for monthly mortgage statements to go to a different address, so the homeowner wouldn’t know the mortgage hadn’t been paid.
After a few months, Bank of America tracked down the homeowner, who was still living in the mortgaged house, to find out why payments on the mortgage had stopped. This is when the homeowner learned that the mortgage hadn’t been paid. The good news, the mortgage scammer has been arrested, charged with stealing almost $1 million through 10 reverse mortgage schemes. The bad news, Bank of America still hasn’t been paid for the conventional mortgage on the home and the homeowner is unsure that he’ll be able to keep his home.
"Reverse mortgages" are increasing in number. For some senior citizens who have equity in their homes, a reverse mortgage can be a good way to tap into the cash value accumulated in the home while still being able to live in the home. However, any homeowner should do careful research when considering a reverse mortgage. The Better Business Bureau and the Federal Bureau of Investigation offer this advice:
- Do not respond to unsolicited advertisements.
- Be suspicious of anyone claiming that you can own a home with no down payment.
- Do not sign anything that you do not fully understand.
- Do not accept payment from individuals for a home you did not purchase.
- Seek out your own reverse mortgage counselor rather than use a mortgage counselor that you may be referred to by the person arranging the mortgage.
For additional information, CLICK HERE to see a report on reverse mortgage fraud which was recently issued by the Federal Bureau of Investigations (FBI).