How Reverse Mortgage Lenders Put Older Homeowners at Risk
Certainly, the continuing availability of reverse mortgages is good news for seniors who need to cash out some of their housing wealth to supplement Social Security, to meet unexpected medical costs, or to make needed home repairs. But growth in the reverse mortgage market has unleashed other, more malignant forces.
With reverse mortgages continuing to grow despite the economic downturn (volume more than doubling between 2005 and 2008), predators who once reaped profits from exotic loans have now focused on wresting more wealth from vulnerable seniors. And securitization, which allowed sub-prime originators to disassociate themselves from the downside risks of abusive lending, is becoming commonplace in the reverse mortgage industry.
This report (28 pg PDF), “How Reverse Mortgage Lenders Put Older Homeowners at Risk” is an excellent analysis of the industry, its players, how reverse mortgages work and the dangers to consumers from certain lender practices.
Source: The National Consumer Law Center
How to Protect Yourself from Home Improvement and Equity Fraud
Many senior citizens have spent years building equity into their homes. Unfortunately, scam artists have developed home improvement and home equity schemes targeted at separating unsuspecting seniors from their most valuable asset—their homes. This report provides some important tips on “How to Protect Yourself from Home Improvement and Equity Fraud.” (2 pg, PDF from the Better Business Bureau)
Do Not Let Predators Take Your Home
Predatory lending often starts with a telephone call, mailing, or e-mail, television commercial, or a knock at your door. The home improvement scam is one of the many tactics predatory lenders will use to convince you to take out a home loan. Other predatory lending scams include offers of debt consolidation, mortgage refinancing, and the promise of extra cash.
What is Predatory Lending?
In general terms, predatory lending is a process, often starting with misleading sales tactics, that results in the origination of a loan to a borrower who ends up paying too much in fees, interest, and/or insurance.
Lenders typically make these overpriced loans based on the equity the borrower has built up in his or her home, rather than on the ability to repay the obligation.
Often borrowers do not fully understand or are not made aware of all the terms of the loan. Older borrowers often fall victim to unscrupulous lending scams out of need to secure funds for needed home repairs. Many borrowers do not have the financial capacity to repay the loan, and are at risk of losing their homes.
Examples of predatory lending practices include:
- Adding hidden costs and expensive extras into the cost of the loan
- Charging inflated interest and fees regardless of credit history
- Repeating refinancing or “flipping” the loan
- Falsifying the borrower’s income
- Forging signatures on loan documents
If you decide to take out a loan, talk to a reputable attorney, financial counselor, or trusted person BEFORE you sign or agree to anything.
This document, “Do Not Let Predators Take Your Home: Know the Basic Facts about Home Equity Fraud” provides good, concise information that you can use. (12 pg, PDF)
(NOTE: It was created for people in New York City area, so the contacts are specific to that area, but the primary information is very good.)