5 NJ Real Estate Reverse Mortgage Scams

Why NJ real estate homeowners should think twice before opting for a reverse mortgage

 

Although being cautious and protecting themselves against computer scams and other fraud has become second nature for many consumers today, yet scams are successfully pulled off every day. The primary reason for this is because the individuals performing the scams are becoming more creative with their ways and choosing their targets more carefully. One group in particular, the elderly, are favored among con-artists because it is believed that older people are less quick to catch on to a potentially harmful scheme than younger people may be. As the number of senior homeowners who choose to go with a reverse mortgage has risen, so has the occurrence of reverse mortgage scams. If you are considering an NJ real estate reverse mortgage, watch out for the following possible scams:

Free Homes

Scammers and con-artists recruit the elderly via advertising to purchase NJ real estate so a reverse mortgage can be obtained on the property. The scammers keep the proceeds from the reverse mortgage and the seniors pay the property taxes and insurance on the home. In general, the reverse mortgage is obtained on a fake, inflated appraised value. Once the elderly homeowners pass away or relocate, the lender is left with a loss due to the lack of accuracy in value of the home.

Foreclosure Scams

In a foreclosure scam, elderly NJ real estate homeowners who are under the risk of losing their homes to foreclosure are targeted. The value of the home is artificially inflated with the aid of a dishonest appraiser, and a reverse mortgage is obtained. After the loan is approved, the scammers have the seniors transfer the title to them and the seniors are left without a home and without the funds from the reverse mortgage. A second way of defrauding these homeowners is by working with a fake financial institution that will inform the owners that although they cannot qualify for a reverse mortgage, that are eligible for another type of loan. During the closing, the title to the property will be transferred away from the homeowners.

Investment Scams

While there are always many investment scams being performed, some are specifically concentrated on getting the target to "invest" in an annuity or NJ real estate fund affiliated with reverse mortgages. The victims will lose their investment when the scammer, typically a reverse mortgage lender, gets away with the funds.

Document Fraud

Some schemers also simply send letters to seniors regarding their NJ real estate loan documents, such as a "Reconveyance Deed", requesting money in order to provide them with copies of the deed, a document that is on file with the lender. Others charge seniors great amounts of money to provide information on reverse mortgages that is available free of charge from the Department of Housing and Urban Development.

Equity Theft Scams

These complex schemes are performed by a group of individuals who purchase a property or a foreclosure, then obtain an inflated appraisal and recruit a senior to repurchase the property and take out a reverse mortgage against it. Typically the attorney handling the settlement for this type of scam is involved in it in some form; therefore all parties receive funds from the reverse mortgage at settlement, leaving the seniors with little or no equity and no cash.

 

The real estate market is changing rapidly and expanding into new avenues almost daily. Sometimes it can be very difficult to find the answers you need on a specific topic or issue. In times like these, you need a real estate professional who will provide valuable information and trustworthy advice. For more information on NJ real estate, call us today or click here to be connected with one of our top real estate specialists.