GAO Warns on Reverse Mortgages

 

Home Equity Conversion Mortgages (HECM) also commonly referred to as reverse mortgages have become a staple in mature Americans independence since the 1990s.  Fortunately the Federal Bureau of Investigation (FBI) and the Government Accountability Office (GAO) in conjunction with the U.S. Department of Housing and Urban Development (HUD) are working together to decrease and eliminate threats to the reverse mortgage industry.

For a mature American who is over 62 years of age or older, can rest easy knowing there is someone on your side to protect you from scams and less than reputable reverse mortgage lenders.  Reverse mortgages are insured and backed by HUD.  The program allows for borrowers, like you, to remain in your home while using the equity for various forms of payments, depending on the type of reverse mortgage program you participate in. 

While it has been reported that HUD has a lack of oversight regarding the reverse mortgage program which has led to abusive lending practices against borrowers, HUD is working diligently to tighten controls to ensure your protection.

“HUD’s internal controls do not provide reasonable assurance that counseling providers are complying with HECM counseling requirements,” GAO reported.  The FBI reported a 36 percent increase in reverse mortgage fraud for the fiscal year 2008. 

HUD counters and states they are making new requirements for stricter counseling sessions and working with the National Reverse Mortgage Lending Association (NRMLA) to ensure all ethical violations are being reported and handled appropriately. 

To better understand how a reverse mortgage scammer works you should be aware they may chose to speak with you at your church, at seminars, and a variety of other public forums in hopes of stealing your money and possibly your home.  Too often reverse mortgage scammers are asked to participate in a process of property flipping, which is the buying of a home for less than market value, making repairs and reselling the home for more money that it is worth.

You can counter scammers by knowing some of the following tactics they try to use in order to take advantage of you:

• Do not respond to unsolicited advertisements.  Often scammers try to market information by telling you how you can receive a free home or assistance with refinancing your home.  These tactics usually include promises of free lifetime money that do not align with the reverse mortgage program as a whole.
• Always be suspicious of any zero money down advertising which includes HECM for purchase program or refinancing.
• Do not sign any paperwork that you do not fully understand.  You should consult your family if you do not understand the paperwork.
• Never accept money or payments from a home that you did not purchase. 
• Seek out a HUD approved HECM counselor on your own.  You can visit the HUD website for a list of HUD approved counselors in your area or request a list from a mortgage lender. 
• Always talk with your family or financial advisor and research all mortgage lenders and counselors.

A thirteen-year veteran of the mortgage industry, Robert Griffin specializes in reverse mortgages and has helped over 3000 Americans find financial security with a reverse mortgage. The owner of Griffin Financial Mortgage LLC, based in Fort Worth, Texas, his memberships include the National Association of Mortgage Brokers (NAMB), the Mortgage Bankers Association (MBA), the National Reverse Mortgage Lenders Association (NMRLA) and the Better Business Bureau (BBB). Robert Griffin is also co-author of “62 Senior Moments.” If you would like more information, please call (866) 683-3690 or visit our Reverse Mortgage Calculator.