The reverse mortgage has gotten a lot of attention lately, but it appears that many seniors just don't trust them. Part of the reason this is true is because there have been stories of a reverse mortgage scam floating about. But are they true, and is it even possible to be scammed?
What constitutes a scam?
It is possible for someone to be unhappy, but not scammed. So when considering a reverse mortgage scam, what would have to happen to make it a bad thing?
Doing a short term reverse mortgage
Except under very specific circumstances, the loan should be used for a long term loan. The fees can be expensive and just don't make sense on a loan you don't plan on keeping.
The scam here is if a mortgage lender is trying to get you to do a reverse mortgage and you don't need one, or won't benefit long term from it. Usually, this is just to generate their paycheck, and that is not a good reason to do the loan.
The exception is if you are trying to avoid foreclosure or other financial hardships. In these cases, a short term reverse mortgage may save you from losing your home or help to do necessary repairs. This is not the norm though, and it should be used cautiously if these are the reasons.
Using proceeds for other investments
It is against the rules for an investment professional to get you a reverse mortgage and then sell you an investment based on the proceeds from the loan. The proceeds from a reverse mortgage should almost never be annuitized, since this defeats the purpose of making your equity "liquid".
Investment professionals are making a double paycheck if they do this, and that is why it is not allowed. It is actually OK if the Investment Company and Lender are two different companies, but it is still discouraged.
Giving money to family
This is a touchy area, but what I am talking about is lending money to family that want to invest it in speculative investments. For example, lending money to a grandchild to flip homes or start a business. This will create hard feelings most of the time. More likely than not, you will find that you will never be repaid.
If you want to gift money to your heirs, it is OK. But try to avoid lending money that you need, for someone else to invest. What most consider acceptable is to pay for a college education or help with a down payment on a home.
The reverse mortgage itself is not a scam, but how the money is used can be. Keep in mind that the equity in your home is there to help you through retirement and lending it or giving it away will just leave you short if you don't get it back.
The best way to avoid a reverse mortgage scam is to make sure the money (and loan) benefits you, not the people asking you to do it. There is nothing wrong with the lender making a buck, or you being generous and gifting the money. But the bottom line is it should benefit you the most. After all, it is the last "savings" that most people have. It should be guarded vigilantly.
After many years of originating loans for seniors, I have come across a reverse mortgage scam once or twice. It is never the fault of the reverse mortgage, but more the person doing the loan, or family members that want some of the money. See more examples of things to look out for on our site.
What constitutes a scam?
It is possible for someone to be unhappy, but not scammed. So when considering a reverse mortgage scam, what would have to happen to make it a bad thing?
Doing a short term reverse mortgage
Except under very specific circumstances, the loan should be used for a long term loan. The fees can be expensive and just don't make sense on a loan you don't plan on keeping.
The scam here is if a mortgage lender is trying to get you to do a reverse mortgage and you don't need one, or won't benefit long term from it. Usually, this is just to generate their paycheck, and that is not a good reason to do the loan.
The exception is if you are trying to avoid foreclosure or other financial hardships. In these cases, a short term reverse mortgage may save you from losing your home or help to do necessary repairs. This is not the norm though, and it should be used cautiously if these are the reasons.
Using proceeds for other investments
It is against the rules for an investment professional to get you a reverse mortgage and then sell you an investment based on the proceeds from the loan. The proceeds from a reverse mortgage should almost never be annuitized, since this defeats the purpose of making your equity "liquid".
Investment professionals are making a double paycheck if they do this, and that is why it is not allowed. It is actually OK if the Investment Company and Lender are two different companies, but it is still discouraged.
Giving money to family
This is a touchy area, but what I am talking about is lending money to family that want to invest it in speculative investments. For example, lending money to a grandchild to flip homes or start a business. This will create hard feelings most of the time. More likely than not, you will find that you will never be repaid.
If you want to gift money to your heirs, it is OK. But try to avoid lending money that you need, for someone else to invest. What most consider acceptable is to pay for a college education or help with a down payment on a home.
The reverse mortgage itself is not a scam, but how the money is used can be. Keep in mind that the equity in your home is there to help you through retirement and lending it or giving it away will just leave you short if you don't get it back.
The best way to avoid a reverse mortgage scam is to make sure the money (and loan) benefits you, not the people asking you to do it. There is nothing wrong with the lender making a buck, or you being generous and gifting the money. But the bottom line is it should benefit you the most. After all, it is the last "savings" that most people have. It should be guarded vigilantly.
After many years of originating loans for seniors, I have come across a reverse mortgage scam once or twice. It is never the fault of the reverse mortgage, but more the person doing the loan, or family members that want some of the money. See more examples of things to look out for on our site.
The Medicaid eligibility rules are clear. They allow $ 2.000, a car and a house, period. If a senior receives a lump-sum from the reverse mortgage, he or she may become uneligible to the Medicaid to pay the nursing home care.
This is a problem about which the press does not speak so much. The reverse mortgage does not have influence on the Medicare or Supplemental Security Income. The Medicaid eligibility rules are actually quite complicated. The monthly payments, which a senior receives from the reverse loan can make him uneligible to Medicaid.
1. If The Nursing Home Waits After 5 Years, Meet An Expert.
If you consider to take a reverse mortgage and you see, that after 5 years you will need nursing home care, you better be wise with your moves.An expert must understand and know exactly, what practices are used in these cases and in this state concerning Medicaid and SSI .
2. Your Local Municipal Housing Authority.
If a reverse mortgage seems dangerous thinking the Medicaid eligibility, it is also wise to seek for alternatives. The local municipal housing authority can help you, maybe the deferred payment mortgage is an option. You can also visit the National Council on Aging website to find guidance.
It is very, very important to be in a constant contact with the experts to get the correct information how to handle the reverse mortgage application. Many people, especially those seniors, who are close to 62, do not think the Nursing home future and thus cannot take that thing into their plans. But an expert can, talk with him!
3. The Money Transfer.
If a senior transfers the money to another place, so that he is not anymore the asset owner, Congress has established a period of ineligibility for Medicaid. It is important to follow the Congress rules to be able to avoid penalties.
4. No Problem, If A Senior Can Manage Without Medicaid.
The secret is to be able to forecast the future income and living costs. The income part is relatively easy, because they are flat, but what happens, if a senior get some oblogatory, extra and regular bills, like the increased medical bills?
One solution could be to take a reverse loan against the home equity, but to leave a major part of the equity untouched. If in the future a senior will need more disposable cash, he can refinance the reverse program and to take more loan. The reserve equity and the risen house prices make this possible.
This is a problem about which the press does not speak so much. The reverse mortgage does not have influence on the Medicare or Supplemental Security Income. The Medicaid eligibility rules are actually quite complicated. The monthly payments, which a senior receives from the reverse loan can make him uneligible to Medicaid.
1. If The Nursing Home Waits After 5 Years, Meet An Expert.
If you consider to take a reverse mortgage and you see, that after 5 years you will need nursing home care, you better be wise with your moves.An expert must understand and know exactly, what practices are used in these cases and in this state concerning Medicaid and SSI .
2. Your Local Municipal Housing Authority.
If a reverse mortgage seems dangerous thinking the Medicaid eligibility, it is also wise to seek for alternatives. The local municipal housing authority can help you, maybe the deferred payment mortgage is an option. You can also visit the National Council on Aging website to find guidance.
It is very, very important to be in a constant contact with the experts to get the correct information how to handle the reverse mortgage application. Many people, especially those seniors, who are close to 62, do not think the Nursing home future and thus cannot take that thing into their plans. But an expert can, talk with him!
3. The Money Transfer.
If a senior transfers the money to another place, so that he is not anymore the asset owner, Congress has established a period of ineligibility for Medicaid. It is important to follow the Congress rules to be able to avoid penalties.
4. No Problem, If A Senior Can Manage Without Medicaid.
The secret is to be able to forecast the future income and living costs. The income part is relatively easy, because they are flat, but what happens, if a senior get some oblogatory, extra and regular bills, like the increased medical bills?
One solution could be to take a reverse loan against the home equity, but to leave a major part of the equity untouched. If in the future a senior will need more disposable cash, he can refinance the reverse program and to take more loan. The reserve equity and the risen house prices make this possible.
If you are a loan officer or mortgage broker, you may be on the market for mortgage leads. If you have no interest in sharing these mortgage leads with anyone else, you may want to consider buying them exclusively.
If you decide to buy your leads exclusively, you can plan on paying a bit more for them. As opposed to buying old or recycled leads in bulk or at two dollars a lead.
An exclusive mortgage lead should not only be exclusive to you and you only, it should be sold to you in real time.
A real time exclusive mortgage lead is one that is delivered to you within seconds of the applicant filling out the on-line application.
If a real time mortgage lead is any older than a couple of hours, it can hardly be called real time, let alone exclusive.
My suggestion to you if you are considering buying exclusive mortgage leads would be to take your time and research the mortgage lead companies you are thinking about investing your money in.
Remember, you work hard for your money, so make sure the mortgage lead company you invest in will get you a return on your investment.
Be sure to call the mortgage lead company and speak with a live person.
Ask the customer service representative where they obtain their leads, and how they are delivered. Also, ask what the time frame is between the potential customer filling out the online form and you receiving it.
If the answers do not live up to your expectations of what real time exclusive mortgage leads should be, than move onto the next mortgage lead company.
Keep searching until you find the mortgage lead company that guarantees they will sell the lead to only you, and that they will deliver it promptly. If they can't have it at your e-mails door step within seconds of receiving it, than keep searching until you find the company that will. Your time and money will be well spent, trust me.
If you decide to buy your leads exclusively, you can plan on paying a bit more for them. As opposed to buying old or recycled leads in bulk or at two dollars a lead.
An exclusive mortgage lead should not only be exclusive to you and you only, it should be sold to you in real time.
A real time exclusive mortgage lead is one that is delivered to you within seconds of the applicant filling out the on-line application.
If a real time mortgage lead is any older than a couple of hours, it can hardly be called real time, let alone exclusive.
My suggestion to you if you are considering buying exclusive mortgage leads would be to take your time and research the mortgage lead companies you are thinking about investing your money in.
Remember, you work hard for your money, so make sure the mortgage lead company you invest in will get you a return on your investment.
Be sure to call the mortgage lead company and speak with a live person.
Ask the customer service representative where they obtain their leads, and how they are delivered. Also, ask what the time frame is between the potential customer filling out the online form and you receiving it.
If the answers do not live up to your expectations of what real time exclusive mortgage leads should be, than move onto the next mortgage lead company.
Keep searching until you find the mortgage lead company that guarantees they will sell the lead to only you, and that they will deliver it promptly. If they can't have it at your e-mails door step within seconds of receiving it, than keep searching until you find the company that will. Your time and money will be well spent, trust me.
Different reverse home mortgage lenders have different rules, but generally a senior must have equity left in his home, and own capital, against which the reverse home mortgage loan will be taken. This equity works as a guarantee.
1. The Target Of The Reverse Home Mortgage Is To Help Seniors.
This principles can be seen in all terms concerning the reverse home mortgage loans. They are very easy to get and very flexible loan types. They offer financial help for immediate needs of the disposable money, for bigger needs, like the home repairs or help for occasional needs in the form of the credit lines. A senior can select, how he wants a lender to pay him.
2. The Reverse Home Mortgage Loan Will Be Taken Against The Equity Of The Home.
There is a clear philosophy. When seniors have saved money during the years, when they worked hard and paid their mortgages, now is the time, when they can use part of these equities for their new financial needs. So the money goes in a reverse way.
This philosophy has also other benefits. When the reverse loans are taken against the home equities, seniors do not need a good credit information nor monthly incomes. This is great, because now those seniors, who have very limited incomes can get a loan and to increase their monthly incomes.
3. Your Credit Information Has No Meaning.
People have bad credit scores for many reasons but for seniors they have even worse influences. The reverse mortgage loans are excellent for senior people, who have bad credit information and additionally difficulties with their monthly expenses.
The bad credit information is especially bad for a senior. But a bad credit information is one thing and the home equity is another thing. If a senior has a home equity left, he is lucky, because that and only that he can use to get a reverse mortgage loan.
4. Your Income Information Has No Meaning.
Can you imagine, that you can get a loan without any regular monthly income and even if your credit record shows very bad figures? This is one of the great benefits, which the reverse home mortgage loan has. The reason is, that the whole loan is taken against the equity of the home and you can never owe more than the value of the home. So the incomes have no meaning.
As you can see from the above qualifications, the reverse mortgage loans are almost for every senior. The key point is, that a senior owns a home, where he has equity left. That is the own capital against which the reverse mortgage loan is taken.
It is also extremely important that a senior meets the reverse mortgage counselor, who is an expert to guide him about his special needs. That is the most important meeting, because the loan comes almost automatically. The counselor meeting requires, that you will prepare yourself correctly and make lots of questions.
1. The Target Of The Reverse Home Mortgage Is To Help Seniors.
This principles can be seen in all terms concerning the reverse home mortgage loans. They are very easy to get and very flexible loan types. They offer financial help for immediate needs of the disposable money, for bigger needs, like the home repairs or help for occasional needs in the form of the credit lines. A senior can select, how he wants a lender to pay him.
2. The Reverse Home Mortgage Loan Will Be Taken Against The Equity Of The Home.
There is a clear philosophy. When seniors have saved money during the years, when they worked hard and paid their mortgages, now is the time, when they can use part of these equities for their new financial needs. So the money goes in a reverse way.
This philosophy has also other benefits. When the reverse loans are taken against the home equities, seniors do not need a good credit information nor monthly incomes. This is great, because now those seniors, who have very limited incomes can get a loan and to increase their monthly incomes.
3. Your Credit Information Has No Meaning.
People have bad credit scores for many reasons but for seniors they have even worse influences. The reverse mortgage loans are excellent for senior people, who have bad credit information and additionally difficulties with their monthly expenses.
The bad credit information is especially bad for a senior. But a bad credit information is one thing and the home equity is another thing. If a senior has a home equity left, he is lucky, because that and only that he can use to get a reverse mortgage loan.
4. Your Income Information Has No Meaning.
Can you imagine, that you can get a loan without any regular monthly income and even if your credit record shows very bad figures? This is one of the great benefits, which the reverse home mortgage loan has. The reason is, that the whole loan is taken against the equity of the home and you can never owe more than the value of the home. So the incomes have no meaning.
As you can see from the above qualifications, the reverse mortgage loans are almost for every senior. The key point is, that a senior owns a home, where he has equity left. That is the own capital against which the reverse mortgage loan is taken.
It is also extremely important that a senior meets the reverse mortgage counselor, who is an expert to guide him about his special needs. That is the most important meeting, because the loan comes almost automatically. The counselor meeting requires, that you will prepare yourself correctly and make lots of questions.