Edward J. Hershewe Insurance Bad Faith Law Blog on Lawyers.com

Are All Reverse Mortgages Fraudulent?

Tuesday, April 27, 2010 by Edward J. Hershewe

We are often asked about reverse mortgage fraud in Joplin, as we are Missouri attorneys who work with clients who experienced some sort of mortgage lending fraud. Particularly with older clients (and their children), the question is whether reverse mortgages are just another type of mortgage loan fraud.

The answer is simple. Under very limited circumstances, reverse mortgages can be a good idea. But most people would prefer to not face those circumstances. You necessarily need to be age 62 or older, and, in a typical scenario, you plan only to live in the home for a short period of time. Often, a reverse mortgage might be used to provide healthcare to an owner who is terminally ill.

Reverse mortgages can be obtained through a federally insured program called Home Equity Conversion Mortgages (HECMs). These are backed by the U.S. Department of Housing and Urban Development (HUD) as well as through private lenders. The least expensive versions are single purpose loans which, as the name implies, can only be used for one purpose. HECMs and proprietary reverse mortgages are more expensive than traditional home loans, and upfront costs can be high.If you elect to get an HECM, you are allowed to live in a nursing home or some other type of hospital, hospice, or other care facility for a year before repaying the loan.

Why does mortgage fraud occur?

Mortgage fraud occurs, because the idea of a reverse mortgage may sound attractive to many potential borrowers. And where there is interest, there are those who are ready to take advantage of homeowners. For such individuals, keep in mind these points:

Equity is eaten up in the loan, leaving you without that value later (or, your heirs will not have that value after your passing).
Your debt to the lender gets bigger with time, because the interest charged grows as does the loan principle with the passage of time.
Most reverse mortgages come with variable interest rates.

If you are uncertain about a reverse mortgage loan you already have, contact the Hershewe Law Firm at 877-382-9734 or contact us online today for a free consultation.

Posted at 13:05 PM

Topic: Insurance Bad Faith