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Health & Fitness

In the Market for a Reverse Mortgage? CCCS Offers Advice to Help You Avoid Being Scammed

CCCS of MD and DE housing counselor Ponciano Allen describes how seniors can prevent being scammed if they're in the market for a reverse mortgage.

If you’re 62 years of age or older, a reverse mortgage may offer the money you need to supplement your retirement income, to pay healthcare expenses, finance home improvements, or even pay off your current mortgage. These loans allow you to convert a portion of your home equity into cash without selling your home or making further monthly mortgage payments. However, Reverse Mortgage Counselor Ponciano Allen cautions this type of loan isn’t for everyone and not all reverse mortgage products are alike. Allen, who works for national nonprofit Consumer Credit Counseling Service of Maryland and Delaware (CCCS), says, “Anyone interested in obtaining a reverse mortgage should understand the financial ramifications of the loan and its potential impact on their estate. That’s why reverse mortgage counseling is required by HUD. It helps seniors protect themselves and make informed financial decisions.”

Allen says seniors need to be aware there are two types of reverse mortgages: Home Equity Conversion Mortgages (HECMs) and proprietary loans. What’s the difference? “HECMs are federally backed, federally insured loans with regulated fees that cover homes up to $625,500 in value. Proprietary reverse mortgages are private loans which are solely backed by the companies that develop them. These companies have the ability to lend to homeowners with property valued above $625,500.”

Before locking into a reverse mortgage it pays to shop around. Carefully weigh loan options and the terms lenders offer.  Also be aware that not all reverse mortgage providers are reputable.  Allen says some prey on homeowners’ lack of knowledge and awareness. She notes, “Seniors make easy targets for scammers when they need cash due to medical expenses or being on a fixed income. They are more likely to own their homes. They also may be less willing to report financial fraud if they worry relatives will think they’ve been scammed because they no longer have the mental capacity to take care of their own financial affairs.”

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Allen says scammers trawl for victims in many places. “Seniors are often targeted at local churches, investment seminars, and via mailers and advertisements on the television and radio. Scammers attract their victims by offering them free money, free homes, investment opportunities, and refinance or foreclosure assistance.” 

Advertising that offers free cash or infinite security are particularly effective.  Allen warns, “While reverse mortgages don’t require monthly payments, they are far from free. Interest and fees accumulate throughout the life of the loan and must be paid back by seniors or their heirs when they pass away or vacate the property.”

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She also recommends that seniors think twice if a mortgage broker promises, “With this loan you can never lose your home.” Why? Because this simply isn’t true.  A reverse mortgage can go into foreclosure if the home is no longer the primary residence of the homeowners who took out the loan or if they fail to:

Keep up the taxes and insurance on the property

Maintain the property

Pay required homeowner’s association dues

To avoid being duped, Allen advises:

Don’t respond to unsolicited reverse mortgage advertisements 

Avoid promotions that offer anything “free”

Say “no” if the reverse mortgage broker doesn’t make it clear who is insuring their loans

Walk away if lenders won’t allow you to choose your own reverse mortgage counselor or offer to make a reverse mortgage counseling appointment for you

Never sign documents unless you fully understand them

Also be aware there are ways to tell if reverse mortgage brokers and loans are trustworthy.  According to Allen, “A reputable HECM lender will be certified to do reverse mortgages by Federal Housing Authority and HUD, and they’ll appear on their list of approved lenders. This list is available on HUD’s website. Legitimate HECM loans are always backed and insured by the FHA.”

Reputable reverse mortgage counseling also helps seniors sidestep being scammed. During sessions, certified CCCS counselors like Allen help clients identify and review all the available financial options open to them, learn what it takes to qualify for and maintain a reverse mortgage, and compare how specific loan products work. In the end, they walk away with a certificate that verifies they completed counseling and resources to help them determine a future course of action.

Allen is proud of CCCS of Maryland and Delaware’s high level of service. She says, “Our reverse mortgage counseling program is unique, because we don’t treat clients like a number. We provide them with thorough, personable counseling from the heart. We keep each and every client’s best interest in mind.” She also is excited CCCS now offers free reverse mortgage counseling (a $150 value). This limited opportunity is made possible through a grant from FHA and HUD and will continue until funding runs out.

If you’d like to schedule a reverse mortgage counseling appointment with CCCS or learn more about its program, please call 1-866-731-8486 or visit the agency website. Sessions take place at local offices or by phone.  And if you’re considering a reverse mortgage, remember: The more aware you become the better chance you have to make a wise decision and avoid being scammed!

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Consumer Credit Counseling Service of MD & DE, Inc. (CCCS) is an accredited 501(c)(3) nonprofit agency that helps stabilize communities by creating hope and promoting economic self-sufficiency to individuals and families through financial education and counseling.  CCCS MD State License #14-01 

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