As many consumers are aware, reverse mortgages have been widely criticized. Critics warn seniors that the industry is wrought with scams, unsavory lenders, and deceptive practices. These warnings have many seniors wondering are reverse mortgages safe? Discover how seniors can protect their reverse mortgage privacy and avoid falling for a mortgage scam.
Are Seniors at Risk of Falling for a Mortgage Scam?
Before the Economic Stimulus Act of 2008, loan officers were allowed to combine reverse mortgages with other financial products. Some lenders required their borrowers to purchase insurance or annuities in order to qualify for a loan. Unfortunately, some unscrupulous professionals took this opportunity to take advantage of struggling seniors and forced them to purchase expensive products they did not need. When critics compare these loans to a mortgage scam, they are commonly referring to this practice.
However, this practice has been outlawed since 2008. Lenders cannot require borrowers to purchase other financial products while getting a loan. Once borrowers have received their loan proceeds, they can use the funds however they wish. Still, if a lender is pressuring borrowers to purchase additional products, seniors should regard this as a sign of a mortgage scam.
How Seniors Can Protect Their Reverse Mortgage Privacy
During the loan process, there are several things seniors can do to protect their reverse mortgage privacy. The first is to ask questions. Before choosing a lender, seniors should ask their loan officer about the loan process, costs, and their other options. Loan officers who are unwilling to answer questions or disclose certain information should be avoided. To protect one's reverse mortgage privacy, seniors should avoid giving out private information until they trust their loan officer.
Seniors should also be weary of professionals who downplay the importance of mortgage counseling. Counseling is a borrower's chance to make sure they understand the immediate and future implications of getting a loan. Loan officers who minimize the importance of this step might have ulterior motives for discouraging borrowers against taking full advantage of counseling.
Another way for seniors to protect themselves is to get the terms of their loan in writing. Lenders are required to provide borrowers with several important documents. One such document is the Total Annual Loan Cost (TALC) disclosure. This disclosure explains exactly how much the loan will cost the borrower each year. Seniors should carefully review their TALC disclosure as well as all other written correspondence to ensure they understand all fees and terms of their loan.
When considering a reverse mortgage, seniors should be concerned with their reverse mortgage privacy. Taking the aforementioned precautions will help seniors avoid falling for a mortgage scam and keep them safe throughout the process. Still, seniors should realize that scams are few and far between. Because most lenders offer Home Equity Conversion Mortgages (HECMs), they are required to follow specific regulations. Fees are federally regulated, and borrowers are required to receive counseling from a third party before even applying for a loan. While all lenders are not created equal, the federal government has made an exceptional effort to ensure that the industry is a safe place for seniors.