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Some Considerations When Seeking A Reverse Mortgage
Author : Midry Woodruff
Once frowned upon by many financial advisors, funds received from a reverse mortgage have gradually gained acceptance as an efficient source of tax-free income. Nevertheless, there are those who still view these loans with a certain trepidation. In many cases, such fears are not unfounded. For with an ample supply of reverse mortgage applications comes an ample supply of tricksters who have no problem taking advantage of these unsuspecting borrowers.
"Follow the money" is an expression that is sometimes used in the investigations of certain crimes. It alludes to the fact that large sums of money tend to attract a criminal element. So, as you might guess, con artists find it hard to resist the large sums of money that stand to be made in the mortgage industry, particularly in the case of reverse mortgages. Here are just a few of the ways that seniors have been taken advantage of:
1. Products and/or services are bundled with the loan itself as part of a package deal. The loan officer leads the borrower to believe that he or she must buy one of these products to be eligible for a reverse mortgage.
2. Borrowers will not be informed of the need for HECM counselling prior to applying for the loan. Face-to-face counselling is always preferable, except in the event that a borrower can't attend live, in-person counselling. Knowing of this allowance scammers will convince borrowers to work with phone-based HECM counselling providers that provide biased or even false information. Unforunately, these ill-informed applicants voluntarily forfeit the equity that they have worked so hard to build-up.
3. Signatures are faked, loan documents are forged and funds that should have gone to the borrowers winds up in the hands of these con artists. Two different checks get sent out. One check goes out to the borrower and the other to the loan officer.
While these scams represent very real dangers to be avoided, there are other dangers that exist only in the minds of some seniors. Having to repay the loan is a concern. The fear of losing their home and not having a place to go is typically the main concern. The fact is, both the lender and borrower are bound by the loan terms. Specifically, the lender can never take the home so long as the borrower retains it as a primary residence. And even if the borrower out-lives the mortgage there is still no way he or she can lose the home. Also, when it comes to inheritence it is the amount owed and not the lien itself that is of consequence. The total amount owed on the loan is the only thing that gets subtracted from the equity inherited by the heirs. This remainder is available to the borrower's heirs.
Would would have guessed that the HECM industry would grow to the point that is has today. Skyrocketing healthcare costs and changing economic times have in part contributed to the popularity of these types of loans. With almost anything in life there can be certain dangers, both seen and unseen. HECM loans are no different. But considering all that stands to be gained it is a goal worth pursuing when one's life circumstances warrant it. Many of the scams presented in this article could have been prevented by simply enforcing existing regulations. Due dilligence and education is the best defense against these dangers.
Author's Resource Box
Midry Woodruff is an expert author whose resume includes top-level HUD consulting. Midrys current focus is on topics related to Martinsville, Indiana and Martinsville homes.
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Tags: Mortgage Loan
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Submitted : 2010-08-30 Word Count : 674 Popularity: 75 Times Viewed: 10
