Elderly Often Vulnerabe to Mortgage Fraud

The elderly are becoming increasingly vulnerable to mortgage fraud and other types of financial abuse and their biggest threat may be their own families.

As tougher economic times befall more Americans and there still exists a shady, predatory element to the mortgage business, it appears more senior citizens face the threat of fraud every day and are being bilked out of millions of dollars each year.

According to a report from Los Angeles Times citing a study from the National Center on Elder Abuse, the issue of elder financial abuse and fraud was highlighted by the recent conviction of a former Florida mortgage loan officer and several cohorts who, among other offenses, falsified loan applications and pocketed money. They also duped many elderly homeowners into agreeing to a “reverse mortgage” on their homes without fully explaining the consequences.

And while there may be a predatory or fraudulent mortgage lender for every county in every state – the Times report cites National Council on Aging statistics noting that homeowner and reverse mortgage scams are the eighth biggest threat to seniors’ financial stability – the largest threat to elderly homeowners at risk for fraud and deception may come from their own family members, including their children.

The immediate family members of elderly homeowners may be the most likely to perpetrate the scams but still use reverse mortgages and other shady loan deals to complete the act. In many cases, the elderly homeowner will enter into a loan agreement – most often borrowing against the value of their homes – without full knowledge of the terms of the deal.

Rules under the Federal Housing Administration’s Home Equity Conversion Mortgage Program require an independent counselor to review the details of a proposed loan with a homeowner. The elderly homeowner should have at least some knowledge of the terms of the deal before entering into it, though it is likely they won’t understand it fully. However, the report states, “the desire to take out a loan they don’t fully comprehend could be a sign that something else is going on in their lives.”

It should be determined who would benefit from a mortgage loan. If the homeowner has no real stake in the benefits to be gained from entering into a deal like a reverse-mortgage, this should raise a red flag that foul play could be afoot. The report highlights several instances in which children “coaxed” their parents into entering into reverse-mortgage loans worth more than $100,000. The children were the only ones set to gain from the temporary windfall, using the money to handle other debts and on lavish purchases.

The report suggests perhaps there are alternatives to reverse-mortgages.

Also, a vulnerable elderly homeowner could be the victim of coercion. Family members could use guilt to push another into signing-up for an otherwise unnecessary loan.

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