Predatory Lenders specialize in Reverse Mortgages
Recently due to the banking crisis a lot of the major players such as Metlife, Wells Fargo, and Bank of America, have pulled out of the reverse mortgage market because of the housing market being so poor and because of the difficulty in assessing a potential customer’s ability to pay back the loan.
The departure of many of the big players has now left the door open for multiple small lenders to flood the market. Many of these lenders are not even licensed to do business and they do not act under any regulations on the practices they use to get these loans.
Some of the red flags are claims of explosive growth, and the claim that the loan will not have to be paid back until the borrower moves out or dies. Often times the lender’s promise that there is no way you will lose your home. In fact many unsuspecting recipients of these nefarious reverse mortgages have been evicted from their homes, and watch helplessly as the locks are changed on their homes.
One of the loop holes they exploit is trying to get the older spouse on the loan application and not to place the younger healthier spouse on the loan application. In this way when the older spouse passes away, the surviving partner is responsible for the full amount of the loan against threat of eviction.
The reverse mortgage is only available to seniors above age 62. Recently a woman of 58 who was married to an 82 year old gentleman, was told that when she turned 62, she could be placed on the application. Her husband became ill and passed away with a heart condition. Since she was not on the loan application, the lender owns the house unless the full amount is paid. Within one month she was informed she owed $193,000. She was asked to pay this fee or face eviction.
Many of these predatory lenders are very aggressive and suggest using the money to take a well deserved vacation. Many will help find a great deal on a cruise for unsuspecting victims. Often times they may suggest the money can be used for badly needed home medical supplies. Be aggressive in return, when looking at a reverse mortgage only use reputable lenders. Know who you are dealing with in advance.
If done correctly a reverse mortgage can be a helpful investment, when done incorrectly it can cost you everything.