By all accounts, reverse home mortgage growth is set to explode. Baby boomers are reaching retirement and, for most, home equity makes up the largest part of their nest egg. Reverse mortgages will be the tools that many of these retirees will use to tap into this nest egg for retirement living expenses. The number of new HUD Home Equity Conversion Mortgages (HECM) already has increased more than percent in the first nine months of 2006 over the same period one year ago.

But along with reverse home mortgage growth come increased opportunities for fraud and scams. Reverse mortgages are different from traditional mortgages in ways that make them attractive vehicles for scam artists:

reverse mortgages are products specifically designed for and targeted to senior citizens, the population group most vulnerable to fraud;

scam artists know that a reverse mortgages provide the senior homeowner with relatively easy access to a sizeable pool of cash; and,

reverse mortgages are harder to understand than traditional mortgages making it easier for the scam artist to confuse and take advantage of victims.

In this article we look at some of the tactics scam artists are using and the precautions reverse mortgage borrowers can take to protect themselves.

Scam Tactic One – Downplay Pre-Loan Counseling

An educated borrower is the scam artist’s worst enemy – but it’s up to the borrower to educate themselves and take advantage of counseling and other opportunities to learn about reverse mortgages.

All three major reverse mortgage programs – HUD HECM, Fannie Mae’s Home Keeper and Financial Freedom – require potential borrowers to have counseling with an independent counselor specially trained in reverse mortgages before taking out a loan.

In a recent Detroit-area fraud case, a corrupt lender was able to keep the borrower in the dark about the amount she was eligible to borrow. She thought her loan would be for $61,000 when in fact she was borrowing $103,000. Guess who pocketed the $42,000 difference? A thorough counseling session would have given the homeowner an accurate idea of the true amount she was eligible for. Unfortunately for the victim, the prosecutor in the case says this never happened:

“A counseling meeting explaining the reverse mortgage process was required by Financial Freedom before the loan could be processed. Mr. James allegedly informed Ms. Schultz that he would be able to waive the counseling meeting by just asking a few questions over the phone.”

Precaution: Although counseling by telephone is allowed, it is always best to meet face-to-face with the counselor. If you find that anyone you’re working with in the process suggests that counseling can be done quickly over the phone or otherwise downplays the importance of pre-loan counseling, be highly suspicious.

Scam Tactic Two – Forgery

Forgery is a key part of many scams. In the Detroit case cited above, the lender requested the title company to prepare two checks payable to the homeowner: one for $61,000 which the homeowner received and a second one for $42,000 which the corrupt lender endorsed with a forged signature and deposited into his own account.

In one California case, two con artists – one working as a financial advisor the other a handyman – convinced an elderly homeowner to take out a reverse mortgage to pay for home repairs. The financial advisor opened an account for the proceeds of the loan and forged the victim’s name to gain access to funds.

Another California case reported in the Santa Cruz Sentinel shows how dangerous it can be to sign “unfinished” documents:

Mrs. Sally Scott is 66 years old. While she receives Social Security and pension checks, she still can’t make ends meet. She saw an ad for a “reverse” mortgage – a loan that allows seniors age 62 or older to receive cash by borrowing against their homes and does not require repayment as long as they live there. Seeking a little financial cushion, she spoke to a mortgage broker about a $10,000 reverse mortgage.

When she received the loan papers, she noticed that the loan amount was $200,000. The broker promised that he’d change the figure, but insisted that she sign the paperwork first. Trusting the broker, Mrs. Scott signed.

A week later, she received a check for $200,000. She immediately notified the broker, who apologized for the mistake and instructed her to wire the money back. As it turned out, the account that Mrs. Scott returned the money to belonged to the broker. He disappeared, leaving her with a mortgage in default and no way to repay the loan.

Precaution: Never sign documents with blanks to be filled in or corrections to be made later. Carefully protect access to your checking and other accounts. Review and reconcile checking account and loan statements regularly. If you find something awry, contact your financial institution immediately.

In the Detroit case cited above, the victim caught on to the scam when she received a loan statement indicating the balance of her reverse mortgage (including interest) totaled $131,000.

Also, take advantage of the free credit reports available to you under federal law. Reviewing your credit report each year is also a good way to catch unauthorized financial activities under your name.

Scam Tactic Three – Charging for Free Reverse Mortgage Information

The complexity of reverse mortgages means that it is natural for borrowers to seek assistance and guidance to help them understand the loan process, find a lender or, generally, better understand what they are getting into. Some scammers have seized on this to offer – for a fee – reverse mortgage information and services that are available to consumers at no charge.

For example, some senior homeowners have been contacted by firms offering to assist them in finding a reverse mortgage lender, in exchange for a percentage of the loan. This type of arrangement should always be avoided. According to HUD’s website:

HUD does NOT recommend using an estate planning service, or any service that charges a fee just for referring a borrower to a lender! HUD provides this information without cost, and HUD-approved housing counseling agencies are available for free, or at minimal cost, to provide information, counseling, and free referral to a list of HUD-approved lenders. Call 1-800-569-4287, toll-free, for the name and location of a HUD-approved housing counseling agency near you.

Precaution: Walk away from anyone who offers to find a reverse mortgage lender for a fee. Use the internet to find free information about reverse mortgages or, read one of the several excellent books that have been published in recent years.

If you feel you have need for a professional financial planner to assess your overall situation – including the reverse mortgage decision – find a certified financial planner (CFP) who works on a fee-only basis and who is knowledgeable of reverse mortgages (many aren’t).

Scam Tactic Four – Posing as a Government or Non-Profit Representative

The most popular form of reverse mortgage – the Home Equity Conversion Mortgage (HECM) – is an official program of the U.S. Department of Housing and Urban Development (HUD). However, neither the HECM program nor other reverse mortgage programs are marketed directly to senior homeowners by government employees.

Unscrupulous reverse mortgage salesmen have been known to represent themselves to elderly homeowners as government representatives or volunteers for non-profit organizations.

Precaution: Be sure you know who you are dealing with and what organization they represent. Do not be timid about asking for information such as their home office location and phone number. Use resources like HUD and the National Reverse Mortgage Lenders Association (NRMLA) to check out the company.

Scam Tactic Five – Bundling Things with Reverse Mortgage Financing

Smart consumers know that the best way to shop for a car is to separate the parts of the transaction – purchase, financing and trade-in – from each another. With a bundled transaction, it’s easy for the consumer to be befuddled and not understand the true cost of the overall deal. What appears to be a “great price” on the car may mask exorbitant finance charges or a low trade-in value.

Similarly, a common tactic of scam artists is to bundle reverse mortgage financing with something else such as home improvements, annuities, risky investments, living trusts or other estate planning products.

In one Seattle-area case, elderly consumers were told that living trusts must be purchased in order to obtain a reverse mortgage. In another case, seniors were encouraged to take out a reverse mortgage and use the proceeds to “invest” in truck-mounted billboards.

Frequently, two or more scammers work as a team. For example, in the California case cited earlier, an unscrupulous financial advisor steered the homeowner to a home repair contractor who was party to the scam and who grossly overcharged the victim for repair work.

If you find yourself dealing with someone who attempts to bundle a reverse mortgage with another product or service or steer you to a particular contractor/lender, be highly suspicious. If you feel at all uncomfortable or that the person is using high-pressure sales tactics, walk away.

Precaution: When home improvements or estate planning services are needed, shop for the best deal. It’s best for you to find what you’re looking for rather than them finding you. Homeowners should avoid doing business with anyone who comes uninvited to the door, makes an unsolicited phone call or whose name is found randomly on a flier.

When you’ve found the best deal, then weigh your financing options – including a reverse mortgage. Keeping these decisions separate will protect you from possible fraud and help ensure you get the most for your money.

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With all of the different parties involved in a real estate transaction, it can be surprisingly simple for serious mistakes to be made in the mortgage or note documents. Banks can be held responsible for these mistakes, even if they are not discovered until after foreclosure has been initiated. But if a mortgage or note has serious material deficiencies, homeowners may be able to have their entire loan declared invalid when defending the foreclosure lawsuit.

The mortgage or note may be defective in any number of ways, from minor deficiencies to major ones that can derail a foreclosure lawsuit entirely. Homeowners may want to take a look at the original mortgage or note that they signed to qualify for their loan and compare it to the version that was recorded and the version that the mortgage company currently holds. Any differences may be valuable sources of information and may lead to the discovery of mistakes. In any event, such differences may be questioned by borrowers.

For instance, terms may not match between one version and another, or terms in riders attached in additional sheets may not match the terms found in the mortgage or note itself. Stated terms may also be impossible to perform, such as if the loan states the rate will adjust in five years but the adjustment date listed is actually only one year from the time the contract was put into force. The date the loan closed and what terms are contained in the paperwork will hold clues to potential deficiencies.

Even if a loan is modified once and homeowners fall behind again, there may be mistakes found in the paperwork. If all of the required parties did not sign the modification agreement, the new note may be defective. Notary stamps that are expired or incorrect also indicate defective paperwork. Homeowners should read the loan documents carefully to find these discrepancies if they wish to include them as defenses in a foreclosure lawsuit.

Invalid terms in a mortgage or note, however, will have different recoveries for borrowers. Minor defects that caused the owners no harm may just be altered by the courts or simply set aside as immaterial. Major, material defects, on the other hand, could result in the entire loan being declared invalid. Of course, a likely consequence for many homeowners in court may be somewhere in the middle of these two extremes.

Homeowners should also view defects in the paperwork as potential violations of other federal and state real estate practices. If the terms are stated incorrectly in the mortgage or note, the calculations based on the defective terms may violate the Truth in Lending Act or other regulations. In such cases, borrowers may sue for damages under these laws or include counter claims in their answer to the lawsuit.

Some common defects that homeowners may run across are listed below:

-Terms in the mortgage and note do not match.

-Terms in the riders do not match the mortgage or note.

-The terms are impossible to perform.

-Errors create liability under the Truth in Lending Act.

-Errors in the interest rate trigger HOEPA regulations.

-Assignments of the mortgage or note are not valid or properly endorsed?

-Assignments were not signed at all.

-The loan is not properly amortized according to the terms of the mortgage or note.

-The mortgage or note recorded with the county do not match the versions included by the bank in the complaint.

-A mortgage modification agreement is not signed by all parties to the loan transaction.

-The lender that approved the modification is not the foreclosing lender and there is no chain of title to indicate the new lender owns the mortgage or not.

-The notary stamp is defective or expired.

-The mortgage lien was released accidentally.

Of course, potentially the best way for homeowners to determine if their loan has any of these deficiencies is to speak with a real estate lawyer. Either by hiring a lawyer to help them with their court case or just consulting with one to find out the best options going forward, good legal advice should be sought out by foreclosure victims. Speaking with an attorney is not a guarantee to prevent foreclosure, but it can help homeowners gain some perspective on how to defend the lawsuit and what to do to recover financially for the long term.

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Any Mortgage! Any Situation! How Can Brown Help You? www.brownlendinggroup.com or CALL Judd at 561.723.4182. FHA & VA Approved Lender providing Home Loans, Reverse Mortgages, Commercial and Business Loans throughout the USA. The FHA and VA home loan at Brown Lending Group helps you refinance out of an ARM, avoid foreclosure, and buy a home with a low down payment. Reverse Mortgages are available for Seniors. Commercial and Business loans also available throughout the USA. Learn more by calling or visiting our website. Sorry, the phone number on this video is no longer in service. It has been replaced with 561.723.4182.

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First, what is a home equity loan? Well a home-equity loan is a second lien against your home’s equity.

I always consider my home equity as a safety net for those difficult times, such as, a job loss or family illness. My rule of thumb for debt management has always been centered on how much equity I had in my house. I would never have my debt exceed my equity.

Now let’s get back to the question. Is a home equity loan a good idea? If you manage your money wisely home equity loans are a good idea but only if you spend the proceeds on items that are a necessity and carry a higher interest rate that the home equity loan. A good example would be home improvements or educational needs. These items usually are quite expensive and require long pay-off periods. By using your equity you will be able to write-off your purchase interest on your federal and state taxes. Another example would be to pay-off high interest credit card and personal loans debt but you must make sure that once the debt is paid you can not accumulate any more credit card debt or you will become financially strapped.

Below are some guidelines if you’re thinking about borrowing against your home’s value:

Don’t waste the cash. Please be aware you’re attaching a new lien on the home, moving closer to the risk of foreclosure. If you do not make your payments on time, the lender has the right to foreclose on your home.

Don’t accumulate more debt than you can handle. As I mentioned earlier your total debt should not exceed your homes total equity.

Evaluate the tax benefits carefully. Review the IRS Publication 936 for details.

Avoid lines of credit unless you have the discipline to make the principal payment on time.

In conclusion:

It is important to carefully consider how you plan on using the equity in your home. If it is for home improvements, education like college or medical expenses then you are adding even more value to your home and personal growth and well being, which is good. If you are using it for daily spending, vacations, cars or other items that quickly depreciate in value, then you could be risking your nest egg and run the risk of owing money on your home far longer that the average 15-30 year mortgage.

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Nothing is more frustrating then receiving word you have a declined mortgage refinance loan. Not being able to secure financing can make all the plans that you had seem to go right down the drain. But knowing the common reasons for loan denial can go a long way in helping to stop the potential problem before it starts.

Why Home Loans Are Declined

Home loans are declined because the underwriters at the lenders have decided your loan either did not fit into their lending guidelines or you were to risky a borrower. The underwriters act as a wall of protection for the lender so if something does not make sense to them they may either ask for clarification or deny the loan.

Common Reason For Loan Denial

One of the most common reasons mortgages get turned down is from borrowers giving false or inaccurate information. Many times this is done by accident. Even when done by mistake it is hard for underwriters to look past false information as it appears to look like potential fraud.

Wrong income levels are often stated on loan applications. The best way to avoid this is to go by last years income on your W-2. If you have had a raise and are hourly figure 40 hours a week as your base salary. Wrong income is the quickest way to get your loan terminated in underwriting.

Property values are another common reason mortgages get turned down in underwriting. People may tell their loan officer their home is worth a certain amount only to find out it is worth much less then they thought This is especially true today with the recent drop in real estate values in many parts of the country.

A credit score drop is also another common reason for losing your loan. One of the biggest mistakes people can make is to have multiple mortgage companies pulling their credit. While a few credit pulls will not hurt you having more then 4-5 credit pulls can start to damage your score. To avoid this stick with three reputable mortgage companies and get quotes from each one.

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Learn what the 10 things you need to know to protect your Idenity and credit. Presented by Craig Turner and Chris Courtland with First Priority Financial – The mortgage loan esperts you refer your friends to! Your Colorado Springs mortgage experts

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5) Manufactured Homes built before 1976 cannot be refinanced
The HUD Code, instituted in 1976, changed the standards of safety and the construction procedures for manufactured and manufactured homes. As such, homes built prior to 1976 were not subject to the HUD Code and are regarded by manufactured home investors as a higher risk loan for a lack of a minimum code of construction. Due to this condition, investors will still provide financing and refinancing for pre-HUD manufactured and manufactured home loans, yet at a slightly higher rate than their post-HUD counterparts.

4) You can get a co-signer if you have doffend qualifying
Contrary to popular dogma, manufactured homes are not cars and cannot be financed like them. The loan contract regards the signers as “borrower” and “co-borrower(s)”. Also, it is inferred, when a manufactured home loan contract is executed by the borrower and co-borrower(s), that they are according to live in the home as their primary residence. Making a false statement such as this constitutes loan fraud and is grounds for federal prosecution.

3) 100% Financing is availcompetent to purchase a manufactured home
There are NO  100% (or “zero down payment”) financing programs availcompetent for any manufactured or manufactured home loans. Do not be fooled! Many loan brokers will attempt to realize this type of manufactured home loan, fraudulently, clscopeing the home to be a stick-built condo. Be sure not to implicate yourself in this kind of scheme by checking that your loan broker truly understands and has a wealth of experience in dealing with manufactured and manufactured home loans.

2) Mobile House Loans are not conventional loans
It is a common mistake to classify mobile or mobile house loans as not being conventional loans. A conventional loan is any loan that isn’t insured by the FHA or warrantyd by the VA or Farmers House Administration. There are FHA and VA loans available on mobile or mobile houses and they vehiclery many stipulations and restrictions with them; however, a mobile or mobile house loan through a financial institution such as a bank or ldesist union is absolutely a conventional loan.

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We all know your credit report is very important in the decision making process for loans. With the current tightening up in the lending arena, one might ask yourself what is required to buy a house in today’s market? During the last 7 years buying a house was fairly easy for just about everyone. The rates were incredibly low and they currently still are. Here is what banks are currently looking for to get you in a house. I will talk about two of the most popular loans, FHA and Conventional. Most of the creative financing that has existed over the years is gone; we are going back to the plain old vanilla loans.

Conventional Loans

Conventional loans are loans that are secured by government sponsored entities such as Fannie Mae and Freddie Mac. This type of loan is usually used for the following type of loans:

a. Purchase

b. Refinance

The current loan limits for conventional loans are $417,000. This particular loan is riskier for banks and requires good credit. This type of loan is run through either Freddie Mac or Fannie Maes automated underwritten engines. All banks use this software to determine whether you are approved or not. This loan typically requires a little money to get into a home, and is for good credit borrowers. Here are the determining factors from your credit report that these engines take into account.

1. Your Credit Score

2. Employment history

3. Time on Job

4. Payment history

5. Debt to Income ratio

6. How much savings do you have

7. How much revolving credit do you have and for how long.

FHA

FHA loans are loans that are insured by the Federal Housing Authority, which is an entity of HUD (Housing Urban and Development). This loan is less risk to the banks, and has a lot of benefits when coming to your credit report history. Here are the benefits.

1. No credit score requirement

2. Low down payment (3%)

3. Easy credit qualifying

Here is what FHA typically looks for to get you into a house.

1. Clean 12 to 24 month history

2. If you have no credit, FHA will allow alternate lines of credit, such as:

a. Letters of payment history for the last 12 months in good standing from the following:

1. Electric Company

2. Water Company

3. Cable Company

4. Day Care

5. Child support history

6. Cell Phone Company

This loan also requires good rental history, you don’t have to have it, but if you have credit issues it’s typically required. When applying for a FHA loan, you probably should get a current copy of your free credit report and do some research. FHA is a loan that is less harsh on your credit, but you need to show at least 3 source of credit reporting in good standing. Having late payments on your credit report during the last 12 to 24 months is sure way to get denied. Get a copy of your free credit report today.

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