Avoid Reverse Mortgage Scams

“Free Homes” for Seniors

Scammers recruit older adults with advertisements offering “free homes.” Seniors sometimes willingly take part in these schemes. How do these scams work?

1. The scammer finds a senior to live in a home; the home is then appraised at an inflated value and a reverse mortgage is obtained.
2. The scammer gets a home equity line of credit to pay for repairs on a home, and the victim lives there while making these improvements.
3. The scammer pretends to be old enough to take out a reverse mortgage and then signs it over to an actual senior, who lives in the home for free.

“A” is correct. The scammer keeps the reverse mortgage loan proceeds, and the senior lives in the home for free but is responsible for paying the real estate taxes, insurance, and repairs. When the senior dies or moves away, the lender is stuck with a loss due to the lack of true value in the home.