How To Detect Scam Reverse Mortgage Loans
Doug Smith

Defined Tag: Reverse Mortgage Loans.

Many people feel tricked by their reverse mortgage loans. They may find themselves paying more fees than they were told, or feel that their lender took advantage of them. Sometimes it is merely the perception of feeling tricked, because the consumer failed to completely understand their reverse mortgage contract. Sometimes they were actually tricked by unscrupulous lenders. Mortgage reversal loans can only be gotten by senior citizens, who are often the targets of scams. Here are some tips on how to help you avoid reverse mortgage scams.

First, the reverse mortgage is a loan that is structured to look like a mortgage. It is called "reverse" because the bank is the "buyer," and you are the "lender." The bank pays you periodic mortgage payments based on the equity of your home. Sometimes you can receive the money as a lump sum or even as a line of credit. However, these reverse payments that you receive are money that is loaned to you. When you more or become deceased, the loan term is finished. The most popular way to repay the payments from your reversed equity loan is for the inheritors or survivors to sell the house and repay the bank.

Second, there will be interest on the reverse equity release that you will have to pay. Therefore you should shop for a lender that offers the lowest mortgage interest rates. Interest is not taken out of the monthly payments that the bank sends to your for the duration of your reversed or backwards mortgage. Rather, the interest is due in full at the end of the mortgage loan, as described previously.

Third, the bank or mortgage lender does not take possession of your house at the end of the loan period. The title to the home stays in your name during the whole reverse mortgage process. Many people think that the bank simply repossesses your home at the end of the loan. That is incorrect. In order to repay the mortgage payments that were reversed, it is up to the family to repay them, usually by selling the house in question.

Fourth, the law requires reverse mortgage applicants to receive qualified counseling about this important financial transaction. This counseling can be administered by offices of a local HUD-approved counseling agency, a national agency such as the American Association for Retired Persons (AARP), Money Management International, or the National Foundation for Credit Counseling. Reverse mortgage counseling can be conducted over the phone of in person. If a potential lender does not mention this requirement, find another broker.

Take the reverse mortgage process as seriously as your first mortgage loan. Visit the website of the National Reverse Mortgage Lenders Association (NRMLA) to find mortgage brokers or lenders in your area. Interview several to see which lender has the best loan terms, and call their references. Also ask anyone you know with a reversed mortgage which company they use. Educate yourself about the process and there will be fewer elderly being scammed by unscrupulous dealers of reverse mortgage loans.

Copyright 2008 by Doug Smith. All Rights Reserved Worldwide. Unauthorized Duplication Prohibited.