Dean Graziosi Loan Mod Scam

Reverse Mortgage Scams Hello, and welcome. This is Charlie Fuller, real estate coach and investor with the Dean Graziosi’s Real Estate Success Academy. In this podcast, I’m going to be talking about reverse mortgage scams. Florida Attorney General Bill McCollum is warning senior citizens about scams involving reverse mortgages, a type of home equity loan frequently abused by con artists and scammers. These loans are often popular options for senior citizens, because they offer a cash source, which can help meet unexpected medical expenses or supplement Social Security, or more. aEoeWhen the senior citizens are concerned about finances and are seeking a legitimate option for say financial relief, they should not have to worry about predatory lenders and brokers trying to capitalize on their precarious position,aE? Attorney General McCollum said. Consumers should take every precaution to avoid scams and situations which would leave them in even worse financial position. Reverse mortgages are a special type of home loan that allows homeowners who are 62 and older to borrow against their home equity without having to repay the money until the home is sold or the borrower passes away or moves out permanently. When the home is sold, lenders recover their principal, plus interest. The remaining value of the home goes to the homeowner or his or her survivors. Unfortunately, as the popularity of reverse mortgages grow, so does the potential for fraud. Predatory lenders, unscrupulous loan agents and dishonest brokers may target senior citizens who may be anxious about their financial security. Deceptive practices and allegations of high-pressure sales tactics are being more frequently encountered as senior citizens are being taken advantage of under the guise of a helpful and legitimate reverse mortgage.

Borrowers also run the risk of being steered into inappropriate loans and annuities by sales agents and insurance brokers who could be working together without disclosing the relationship to the borrower. McCollum noted that the reverse mortgage can serve a purpose when financed through legitimate lenders. According to the US Department of Housing and Urban Development, which we know as HUD, homeowners who take out a reverse mortgage can receive payments in a lump sum or a monthly payment, or on an occasional basis as kind of like a line of credit. Homeowners whose circumstances change can restructure their payment options. Now, HUD-approved housing counseling agencies are available for free or at a minimal cost, to provide information, counseling and free referral to a list of HUD-approved lenders. HUD does not recommend using an estate planning service or any service that charges a fee for just referring a borrower to a lender. Now, this information can be obtained by calling HUD at 1-800-569-4287. That’s 1-800-569-4287. More information is also available on the HUD reverse mortgage website,. I’ll give that to you again.

Now, by all accounts, reverse home mortgages are basically set to explode. Baby-boomers are reaching retirement age and, for most, home equities makes up a large part of their nest eggs. Reverse mortgages will be the tool that many of these retirees will use to tap into the nest egg for retirement living expenses. But along with the reverse home mortgage growth comes an increased opportunity for fraud and scams. Reverse mortgages are different from traditional mortgages in ways that make them attractive vehicles for scam artists. For instance, reverse mortgages are products specifically designed and targeted to senior citizens, the population group most vulnerable to fraud. Also, scam artists know that reverse mortgages provide the senior homeowner with relatively easy access to a sizable pool of cash. And, reverse mortgages are harder to understand than traditional mortgages, making it easier for the scam artist to confuse and take advantage of the victims. Now, we’re going to look at some of the tactics scam artists use and the precautions reverse mortgages borrowers can take to protect themselves.

Downplay Pre-Loan Counseling Now, an educated borrower is the scam artist’s worst enemy. But it’s up to the borrower to educate themselves and take advantage of counseling and other opportunities to learn about the reverse mortgages. All 3 major reverse mortgage programs, that’s HUD, HECM, and Fannie Mae’s Home-Keeper and Financial Freedom Program, require potential borrowers to have counseling with an independent counselor specifically trained in reverse mortgages before taking out a loan. Now, in a recent Detroit area fraud case, a corrupt lender was able to keep the borrower in the dark about the amount she was eligible to borrow. She thought her loan would be for $61,000, when, in fact, she was borrowing $103,000. Guess who pocketed the $42,000? A thorough counseling session would have given the homeowner an accurate idea of the true amount that she was eligible for. Ultimately and unfortunately, the prosecutor in the case said, aEoeThis never had to happen.aE? Now, a counseling meeting explaining the reverse mortgage process is required by Financial Freedom before the loan can actually be processed.

Mr. James allegedly informed Mrs. Schultz that he would be able to waive the counseling meeting by just asking a few questions over the phone. So, here’s a precaution. Although counseling by telephone is allowed, it’s always best to meet face-to-face with the counselor. If you find that anyone that you’re working with in the process suggests that counseling can be done quickly, over the phone, or otherwise downplay the importance of pre-loan counseling, be highly suspicious. Forgery Forgery is a key part of many scams. In the Detroit case cited above, the lender requests that the title company prepare 2 checks payable to the homeowner; one for $61,000, which the homeowner received, and a second one for $42,000, which the corrupt lender endorsed with a forged signature and deposited into his own account. In one California case, 2 con artists, one working with a financial advisor, the other a handyman, convinced an elderly homeowner to take out a reverse mortgage to pay for home repairs.

Now, the financial advisor opened an account for the proceeds of the loan and forged the victim’s name to gain access to the funds. Another California case reported in the Santa Cruz Sentinel newspaper shows how dangerous it can be to sign unfinished documents. Mrs. Sally Scott is 66 years old. Now, while she receives Social Security and a pension check, she still can’t make ends meet. She saw an ad for a reverse mortgage, a loan that allows seniors age 62 and older to receive cash by borrowing against their homes and doesn’t have to repay as long as they live there. Seeking a little financial cushion, she spoke to a mortgage broker about a $10,000 reverse mortgage. When she received the loan papers, she noticed that the loan amount was $200,000. The broker promised that he’d change the figure, but insisted that she sign the papers right there. Trusting the broker, Mrs. Scott signed. A week later, she received a check for $200,000. She immediately notified the broker, who apologized for the mistake and instructed her to wire the money back.

Now, as it turned out, the account that Mrs. Scott returned the money to belonged to the broker. He disappeared, leaving her with a mortgage in default and no way to repay the loan. So, here’s a precaution: never sign any documents with blanks to be filled in, or corrections to be made later. Carefully protect access to your checking and other accounts. Review and reconcile checking accounts and loan documents regularly. And if you find something awry, contact your financial institution immediately. Now, in the Detroit case cited above, the victim caught onto the scam when she received a loan settlement indicating the balance of her reverse mortgage, including interest, totaled $131,000. Also, take advantage of the free credit reports available to you under the federal law. Reviewing your credit report each year is also a good way to catch unauthorized financial activities under your name. Charging For Free Reverse Mortgage Information Now, the complexity of reverse mortgages means that it’s natural for borrowers to seek assistance and guidance to help them understand the loan process, finding a lender, or just generally better understanding what they’re getting themselves into.

Some scammers have seized on this offer for a fee, to give reverse mortgage information and services that are available to consumers at no charge. For example, some senior homeowners have been contacted by firms offering to assist them in finding a reverse mortgage lender in exchange for a percentage of the loan. Now, this type of arrangement should always be avoided. According to the HUD’s website, HUD does not recommend using an estate planning service or any service that charges a fee just for referring a borrower to a lender. HUD provides this information without cost. And HUD-approved housing counseling agencies are available for free or at a very minimal cost, to provide information, counseling and free referral to a list of HUD-approved lenders. To get this information, call 1-800-569-4287. Now, that’s toll-free. And for the name and location of a HUD-approved housing counseling office near you, call that number and you’ll be set up. Here’s a precaution: walk away from anyone who offers to find a reverse mortgage lender for a fee. Use the Internet to find free information about reverse mortgages or read one of the several excellent books that have been published in recent years.

If you feel you have a need for a professional financial planner to assess your overall situation, including a reverse mortgage decision, find a certified financial planner aE” they go by a designation of a CFP aE” who works on a fee-only basis, not a percentage of the loan, and who is knowledgeable of reverse mortgages. The reason we say that is because many are not. Posing As A Government Or Nonprofit Organization The most popular form of reverse mortgage, the Home Equity Conversion Mortgage, which is the HECM, is an official program of the US Department of Housing and Urban Development. However, neither the HECM program nor other reverse mortgage programs are marketed directly to senior homeowners by government employees. Unscrupulous reverse mortgage salesmen have been known to represent themselves to elderly homeowners as government representatives or volunteers for nonprofit organizations. Your precaution: be sure you know who you’re dealing with and what organization they represent. Do not be timid about asking for information such as their home office location and their phone number. Use resources like HUD and the National Reverse Mortgage Lenders Association to check out the company.

Bundling Things With Reverse Mortgage Financing Smart consumers know that the best way to shop for a car is to separate the parts of the transaction aE” the purchase, financing, and the trade-in aE” all from each other. Now, with a bundled transaction, it’s easy for the consumer to be befuddled and not understand the true cost of the overall deal. What appears to be a great price on the car may actually mask exorbitant finance charges or maybe a low trade-in value. Similarly, a common tactic of scam artists to bundle reverse mortgage financing with something else, such as maybe home improvements, an annuity, risky investments, living trusts or other estate planning products, is very common. In one Seattle-area case, elderly consumers were told that living trusts must be purchased in order to obtain a reverse mortgage. In another case, seniors were encouraged to take out a reverse mortgage and use the proceeds to invest in truck-mounted billboards. Frequently, 2 or more scammers work as a team. For example, in the California case cited earlier, an unscrupulous financial advisor steered the homeowner to a home repair contractor, who was a party to the scam and who grossly overcharged the victim for their repairs. So, if you find yourself dealing with someone who attempts to bundle a reverse mortgage with other products or services, just steer clear of those people because they’re highly suspicious.

If you feel at all uncomfortable or that the person is using high-pressure sales tactics, walk away. Now, here’s an interesting situation. What are the drawbacks? These are things that oftentimes don’t come to light. Number one, interest rate is typically 1A?% to 2% higher than traditional mortgage rates. So, anyone thinking about using a reverse mortgage should consider comparing the costs and benefits of actually refinancing with a traditional mortgage. Just compare the costs. Number 2, the other costs are fairly high. There is an origination fee, which will be the greater of $2,000 or 2% of the maximum qualified amount. There is typically a mortgage insurance premium equal to 2% of the lesser of the value of the house or the maximum qualifying amount in the first year and A?% of the loan annually thereafter. There are also appraisal fees and a litany of closing costs. And, number 3, the likelihood of keeping a house in the family after the death of the homeowner is highly unlikely. However, for anyone considering a reverse mortgage, the likelihood is low under any other option as well. So, is the reverse mortgage a good situation? Well, yes. There definitely are many Americans for whom it’s going to be a good option. The basic profile would be someone who owns their home, needs either a higher monthly income or mortgage debt relief, and is at or near retirement age, and does not have significant other assets, and highly values living in their current home. So, reverse mortgage is definitely a good situation in some circumstances, and something that you need to be careful with if you’re thinking about it. Until next time, this is Charlie Fuller.

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