Care of the Office of Inspector General - United States Department of Housing and Urban Development
Due to the economic fallout from the pandemic caused by the coronavirus disease of 2019 (COVID-19), more people may be considering reverse mortgages and may become targets of fraud schemes related to them.
Reverse mortgages are a type of mortgage loan that allows individuals aged 62 and older to withdraw the equity in their home through monthly payments or a lump sum payment. Typically, the loan is required to be repaid when the home is sold or when the owner dies, otherwise the property belongs to the lender.
The Federal Housing Administration (FHA) insures reverse mortgage lenders from losses they may suffer through its Home Equity Conversion Mortgage (HECM) program when a reverse mortgage borrower defaults. Reverse mortgage borrowers can default if they violate conditions of the mortgage, such as when a borrower fails to pay property taxes or homeowners’ insurance, no longer occupies the home as a primary residence, or has not kept the home in good repair.
Because of economic uncertainty caused by the pandemic, HECM borrowers may become targets of schemes designed to take advantage of those seeking reverse mortgages.
Perpetrators of common reverse mortgage schemes:
Typically, HECM borrowers do not realize it was a scam until they hand over the funds and the investment, service, or product is never provided.
If you are considering a HECM (reverse mortgage) loan,
If you think you may be a victim of a fraud scheme, report it to the HUD Office of Inspector General. You may report fraud by mail to 451 7th Street SW, Washington, DC 20410, email to email@example.com; or fax to (202) 708-4829
Marc has 36 years in financial services and 6 years in teaching.
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