It should come as no surprise to friends of AgingOptions that we’re big fans of reverse mortgages – in the right circumstances. Over the past year or more we’ve noted with interest how a growing number of financial experts have begun singing the praises of this once-maligned financial instrument. For some seniors in some situations, using the services of a reputable mortgage professional, a reverse mortgage can be the perfect solution to help them remain securely in their homes.
Sadly, however, wherever there’s a chance to make a dishonest dollar, you’ll find scam artists poised to take advantage of the uneducated and unprepared. With that in mind, we strongly recommend you take a look at this very recent article on the website Investopedia. If you’re interested in a reverse mortgage, or if you have a parent or other loved one looking into the pros and cons of a reverse mortgage, this article can give you some danger signs to watch out for. (Let us add one more suggestion: if a reverse mortgage is something you’re interested in, contact us here at AgingOptions and let us refer you to one of our trusted professional partners.)
“Of all financial con artists,” writes Investopedia, “reverse mortgage scammers are arguably the worst. They abuse their standing as trusted advisors or lenders – or supposedly professional contractors – to take advantage of elderly folks who need funds. They convince them to sign up for a financial product that’s complicated even for well-educated, fully cognizant people to wrap their heads around, much less someone whose mental capability may have diminished with age. Then they steal the proceeds, leaving the borrower with little but new debt on his home, and even – worst-case scenario – the loss of it.”
These are powerful words, but we concur 100 percent. Because you have to be 62 or older in order to qualify for a reverse mortgage, the prime prospects are seniors with plenty of home equity who dream of remaining in their own homes. Tragically, these seniors can often be the most vulnerable and easily manipulated. Investopedia describes a few ways in which these scams take place.
According to the article, sometimes unscrupulous home repair contractors will approach an elderly homeowner trying to sell remodeling or repair services. When the homeowner says the work is too expensive, the shady contractor persuades the victim to take out a reverse mortgage, which may definitely not be in the homeowner’s best interests. Once the client has paid the contractor, there’s little or no guarantee that the work will ever be satisfactorily completed. “Any home-improvement vendor or contractor who suggests that you pay for the work with reverse mortgage proceeds probably isn’t someone you want working on your house,” advises Investopedia, adding, “Who knows: Their work could be as shoddy as their advice.” Home repairs might be a good reason for a reverse mortgage, but it needs to be something you as the homeowner decide to do – not something you’re persuaded to do.
Sometimes so-called financial advisers have cajoled seniors into taking out a reverse mortgage to pay for financial products they don’t need, such as stocks, paid-up whole life insurance or an annuity. Tragically, there have also been documented instances where people to whom senior homeowners have entrusted their financial affairs through a Power of Attorney have taken out a reverse mortgage on the elderly person’s house and diverted the funds to their own accounts. There was even a 2009 case in Orlando cited by Investopedia in which a title insurance firm confessed to stealing more than $1 million in reverse mortgage proceeds. Instead of using the funds to pay off the borrowers’ original mortgages, the company kept the money, and the unsuspecting borrowers soon received notices of foreclosure.
There are more such warnings in the Investopedia article and we encourage you to read it. But in our view, in order to protect yourself from these scams, the most important thing is to work only with a trusted professional reverse mortgage expert who will give you accurate, objective advice. “Taking out a reverse mortgage is a decision that requires careful consideration and a complete understanding of the details and consequences,” Investopedia warns. “If a reverse mortgage lender is making you feel rushed, stressed out or uncomfortable in any way, turn around and find another lender.” We say “Amen” to that. Fortunately, as we said above, we know some highly experienced, trustworthy reverse mortgage experts to whom we will gladly refer you to if you’ll contact us.
Have you given careful thought to the other important aspects of your retirement planning? Too many people approaching retirement focus all their attention on financial issues, but money is only part of the retirement picture. Deciding where and how you wish to live as you age quickly causes retirement to become a housing issue. Protecting your assets and your plans will trigger a legal issue. Planning for every health and long term care contingency raises a medical issue. Informing your loved ones and getting them on board in support of your plans makes retirement a family issue. Is there one retirement plan that wraps the financial, legal, housing, medical and family issues into one comprehensive approach? The answer is an AgingOptions LifePlan.
Why not invest just a few hours and find out more? We invite you to attend a free LifePlanning Seminar where you’ll learn about the dramatic power of a LifePlan. For dates, times and locations of upcoming seminars, and for online registration, click on this link, or contact us during the week. It will be our pleasure to serve you!
(originally reported at www.investopedia.com)