Avoid Reverse Mortgage Scams

Equity Theft Schemes

The FBI reports that equity theft schemes are the most common form of reverse mortgage fraud. How do these complicated scams work?

1. The scammers offer to pay the homeowner’s forward mortgage payment, and then ask the victim to take out a reverse mortgage to reimburse them.
2. Scammers work together to buy a distressed property or foreclosure, obtain an inflated appraisal, and find a senior willing to repurchase the property.
3. A scammer offers someone a reverse mortgage at a very high interest rate and then forecloses when the victim cannot afford to make payments.

“B” is correct. Once the senior buys the property, the scam artists encourage him/her to take out a reverse mortgage on it. A reverse mortgage settlement attorney is also likely to be in on the scam. Once closing is completed, the scammers make off with the mortgage loan proceeds, leaving the senior with little or no equity and no cash.