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More homeowners age 62 and older are starting to take advantage of the many benefits that a reverse mortgage offers them, including the elimination of monthly mortgage payments and access to their home’s equity. Unfortunately, as these loans have become a more popular form of financing, the ways in which older homeowners are being defrauded are becoming more varied. But, the good news is that the Department of Housing and Urban Development (HUD) is constantly finding new ways to identify and prevent reverse mortgage fraud so older homeowners stay safe.
Fund set aside for enhanced consumer protection
The new health care bill includes $777 million for programs working to prevent elder abuse and to ensure that those responsible for mortgage fraud are properly punished. This is good news for all those protective service programs that work every day to investigate cases of elder abuse and financial exploitation of older homeowners because they will receive special funding from the government. With this funding, an estimated 1,700 new investigators of elder abuse can receive funding to launch investigations and work toward preventing future fraud. A new Coordinating Council will also be formed to recommend new ways to prevent elder abuse and mortgage fraud involving older homeowners.
Advisory issued to alert home owners about mortgage schemes
The Financial Crimes Enforcement Network, along with HUD, has issued an advisory to alert older homeowners of common reverse mortgage schemes and frauds due to the prevalence of mortgage fraud by both financial institutions and, unfortunately, sometimes family members. The advisor explains the most common types of mortgage schemes being used and lists potential red flags for homeowners and potential borrowers, such as cross selling and evasion of cash-out loans. Financial institutions are asked to report any fraudulent activity in their Suspicious Activity Reports (SARS) so that HUD is aware of problems and can take further action.
knowledge is power!
The government is taking steps to stop mortgage fraud and elder abuse, but homeowners can also be proactive. The best way for older homeowners to avoid becoming potential victims of mortgage fraud is to be knowledgeable about reverse mortgages and their requirements. A homeowner can do this by doing personal research, consulting with a mortgage specialist and attending reverse mortgage counseling sessions with a HUD-approved financial counselor. The counseling session will explain to the homeowner what to expect from the loan, as well as discuss its requirements so that there are no surprises in the future.
Homeowners considering this type of financing should obtain more information from a loan specialist who can determine their eligibility, provide them with important reverse mortgage information and answer any questions they may have. This type of loan can be a good financial solution for home owners as long as they are well informed about the loan process so that they do not fall prey to reverse mortgage scheme.
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