The Portland, Ore. office of the Federal Bureau of Investigation (FBI) has issued a press release aimed at highlighting instances of elder financial fraud, singling out real estate more broadly and reverse mortgages specifically as among some of the most persistent scams targeting senior citizens.
“Seniors are a prime target because they tend to be financially stable, to be trusting, and to be reluctant to say ‘no,’” the release reads. “We find this particularly true when it comes to real estate fraud schemes. Reverse mortgage frauds, also known as Home Equity Conversion Mortgages, are one of the most popular real estate scams we see.”
While the verbiage in the initial explanation may seem disconcerting to those in the reverse mortgage industry by aligning the HECM program with instances of fraud, the FBI goes on to explain the key differences between legitimate reverse mortgages and the use of the reverse mortgage concept to target a senior for a form of financial abuse.
“A legitimate Home Equity Conversion Mortgage is insured by the Federal Housing [Administration] or FHA,” it reads. “It allows eligible homeowners to access the equity in their homes by providing funds without the homeowner having to make a monthly payment. When a fraudster finds a senior who is not familiar with the requirements or the process, the results can be devastating.”
Some of these results can be a fraudster pressuring a senior into taking “inappropriate reverse mortgages,” the release says, while others involve pressuring a victim to use some of their loan’s proceeds to buy an annuity which “may not even mature for many years.”
The release also describes how it investigates instances of seniors being used as “straw buyers,” where a fraudster persuades their victims to sign real estate purchase papers which leaves the senior saddled with intense a new, forward mortgage to pay off.
“In the end, the bad guy often ends up skimming the equity and leaving the victim holding a hefty 30-year mortgage with potential criminal liability,” the release says. “In other related real estate scams, the criminals may offer the victims free homes, investment opportunities, or foreclosure and refinance assistance. The result is often the same – you lose that cherished nest egg and your credit history is in ruins.”
Last summer, the U.S. Department of Housing and Urban Development (HUD) Office of the Inspector General (OIG) issued a fraud bulletin aimed at informing the public about illegitimate reverse mortgage scams, noting that interest in the product category had risen due to the ongoing economic impacts of the COVID-19 coronavirus pandemic.
Since the product category is primarily aimed at seniors — a demographic which has historically been a focus of the efforts of fraudsters — the bulletin aims to address common practices that targets of scams can take, while also offering a series of “dos and don’ts” related to what a consumer can do if they’re considering applying for a Home Equity Conversion Mortgage (HECM) loan in the current climate.
Read the press release published by the Portland, Ore. FBI office.