Funding retirement can be tricky for some seniors. Instability in the stock market and poor returns on many investments means some seniors are looking to other avenues for financial support. A growing trend has emerged as more and more seniors are converting the equity in their homes into a new source of credit. One such loan product, the Reverse Mortgage, has become a popular source of consumer credit. But, as in virtually every industry, scam artists and fraudsters have begun to take advantage of uninformed seniors in financial need.

What is a Reverse Mortgage?
A Reverse Mortgage is a special, legal type of loan that allows homeowners to convert the equity in their home into cash, without incurring monthly penalties (The opposite of a traditional mortgage). Reverse Mortgages are neither available to, nor ideal for everyone. To acquire a Reverse Mortgage you must be 62 or older, have a small mortgage balance and the property must be your primary residence. A Reverse Mortgage loan itself does not have to be repaid, as long as the senior homeowner is alive and living in the property. When the home is sold or the homeowner passes away, the equity left on the property is paid out.

Reverse Mortgage Controversy
A Reverse Mortgage is a legal, legitimate loan option; however, there is some controversy around this type of financial product.

The major benefits of a Reverse Mortgage is that they provide some financial relief to senior homeowners that already have substantial equity in their home, but now find it difficult to make mortgage payments. They also allow homeowners to use the equity in the home without having to sell their property.

The major disadvantages of a Reverse Mortgage: interest rates are typically higher than traditional mortgages, fees associated with obtaining a Reverse Mortgage can be high, and you could quickly use up the equity in your home. There are often alternative solutions that can fulfill a senior’s financial needs.

Reverse Mortgage Scams
Here are three common scams related to Reverse Mortgages that specifically target vulnerable seniors:

1) Information fees - Potential Reverse Mortgage borrowers are often duped into paying fees (which are normally free) to fraudsters for information and assessments related to this mortgage/loan product.

2) Inflated value and transfer of title - Fraudsters often work with an extensive team of con artists to artificially inflate the value of a home, assist a senior in acquiring a reverse mortgage, then dupe them into transferring away the title of the property.

3) Document Fraud - Scam artists posing as representatives of financial institutions send letters to seniors asking them to submit fees and copies of documents that need to be filed to continue the Reverse Mortgage loan. With legitimate Reverse Mortgages, all documents and fees will be dealt upon approval of the loan.

If you or anyone you know is a victim of mortgage or real estate fraud, contact the Financial Institutions Commission (604-953-5200 or fic.gov.bc.ca).

To avoid becoming a victim of scams related to Reverse Mortgages, be sure to carefully research and understand how such a loan product works. Seek out your own reverse mortgage specialist and be sure you speak to qualified professionals.

FEBRUARY 2012 SENIOR LIVING MAGAZINE VANCOUVER ISLAND
FEBRUARY 2012 SENIOR LIVING MAGAZINE VANCOUVER & LOWER MAINLAND