Real Estate Scammers are Using Reverse Mortgage
Program to Flip Depressed Homes
Senior citizen gets a free house, scammers get the
money, but senior can’t afford the home
Oct.
9, 2008 - There is a new scam involving reverse mortgages that everyone
needs to be aware of because it doesn’t affect just senior citizen
borrowers, according to Cliff Auerswald of All Reverse Mortgage Company.
It seems that in their effort to find new ways to beat the system, there
are some who are looking for ways to use senior borrowers and reverse
mortgages to flip properties.
Seniors considering reverse mortgages lowering
their home values, new housing legislation helps older
Americans, says reverse mortgage lender in other studies
Most reverse mortgage lenders have caught on to the
scheme and have added seasoning requirements to HUD’s underwriting
criteria to avoid these schemes, but that has not stopped the
unscrupulous few from taking a program meant to help senior homeowners
access the equity in their homes and turning it into yet another means
for quick cash, he says.
Here’s how Auerswald says the scam works.
An investor or group of investors buy foreclosure
or rehab homes at below market prices. Since there are not a lot of
quick buyers in today’s market, these seekers of quick cash have started
trying to use seniors in their scam.
They arrange for a bogus “sale” to the senior.
Then, because HUD had no seasoning requirements (in other words, there
was no minimum timeframe required between the time a senior to buy a
home and the time they could take out a reverse mortgage refinance),
these scam artists arrange for a reverse mortgage for the senior at an
inflated value to enable the senior to qualify for the reverse
mortgage.
Auerswald says, “With the reverse mortgage
proceeds, the investor or the group of investors are taken out of the
transaction with a nice profit and the senior receives a home with no
payment so everyone wins, right? Wrong!”
These loans are insured by the Federal Housing
Administration (FHA) and often sold in the secondary market to the
Federal National Mortgage Association.
The Home Equity Conversion Mortgage (HECM or
“Heck-um”) reverse mortgage program was approved by congress and signed
into law by Ronald Reagan to allow senior homeowners access to their
equity, so that they could age in place, while never having to make
mortgage payment.
These straw borrowers have no built up equity and
no demonstrated ability to maintain the property or to pay the taxes and
insurance, points out Auerswald.
The premise behind the reverse mortgage is much the
same as insurance programs in that with certain equity positions and
actuarial tables with borrowers’ ages, the borrower, the borrowers’
heirs and the government should be protected against losses. When these
parameters are upset by fraudulent circumstances, the safeguards are not
there.
“When we read about the greed on Wall Street and we
hear about what actions lead to bail-outs, etc., this is exactly the
type of greed and shady dealing that threatens Americans today,” he
says.
“These few who are looking for the quick buck are
putting senior citizens at risk by attacking a program meant to help
them and twisting it. They also are not helping the seniors when they
put them into these homes and the cannot afford to pay for the
maintenance, taxes and insurance.
“And finally, when we hear numbers like $700
Billion for bailing out people who did risky programs, one has to ask
how much of that number includes outright fraud, and how much in future
losses the greed of these scammers will cost?!”
He cautions senior citizens who are approached by
people claiming to be using a “take-out strategy” of reverse mortgages
for rehab or foreclosure properties. The seniors, who will be deeded
onto title, will also be asked to sign a Quit Claim Deed up front, so
that if the scheme does not go through the seniors can be easily removed
from the property. You should know that this is a fraud.
“When people finally realize that, like all fraud,
everyone loses, one can only hope the prosecutors and the FBI follow the
money trail and the sales history to implicate all who have been
involved,” he says.
About All Reverse Mortgage Company
ARMC is a HUD approved Lender helping senior
homeowners turn dormant equity into spendable tax-free cash. The
company’s founder has been in mortgage banking for over 32 years and
this dedicated team of mortgage professionals have written their own
reverse mortgage product and sold reverse mortgage loans to investors on
Wall Street. We are passionate about seniors’ rights to age in place
and dignity and about the reverse mortgage product’s ability to allow
them to do so. Website:
http://www.allrmc.com
Editor's Note: All Reverse Mortgage is an
advertising customer of SeniorJournal.com
Keep up with the latest news for senior citizens, baby
boomers
Oct.
9, 2008 - There is a new scam involving reverse mortgages that everyone
needs to be aware of because it doesn’t affect just senior citizen
borrowers, according to Cliff Auerswald of All Reverse Mortgage Company.
It seems that in their effort to find new ways to beat the system, there
are some who are looking for ways to use senior borrowers and reverse
mortgages to flip properties.
