Tips For Avoiding Reverse Mortgage Scams

Tips For Avoiding Reverse Mortgage Scams,

We came across a truly useful book the other day: Scam Proof Your Life (377 Smart Ways to Protect You & your Family From Ripoffs, Bogus Deals & Other Consumer Headaches). The book is written by Sid Kirchheimer, “AARP’S Scam Alert Expert” and contains a wealth of practical tips and advice to use in protecting against all types of financial mischief from high-tech identity theft to avoiding used car sales scams.

Our initial interest in picking up the book was to see the advice offered for avoiding reverse mortgage scams. Given the authors AARP connection (even highlighted on the cover) we surely thought a chapter (at least a few pages) would be devoted to dangers in the fast-growing reverse mortgage sector. On this point we were disappointed. Not a word about reverse mortgages or reverse mortgage scams.

A chapter is devoted to “Homes”, but it deals mostly with home purchase mortgages and home improvements. Quite surprising that a book about consumer scams carrying the AARP logo on its cover does not mention reverse mortgages.

Still, Scam Proof is a worthwhile read. One section that does pertain to reverse mortgage borrowers is a concise summary of current research on reasons why seniors may be more susceptible to certain fraud schemes. The research is insightful and worth summarizing and sharing here:

According to Researchers: “(T)he aging brain is more likely to remember false statements as true if they sound familiar or are repeated often. The aging brain is also less likely to recall what was originally said.”

Fix: Get things in writing - quotes, guarantees, your own notes of what was discussed. Having written documentation helps ensure you recollect things accurately.

According to Researchers: “(A)s the day progresses, older individuals grow less capable of processing fine-print details such as contract terms - especially under act-now pressure…There is not much difference in this capacity between older and younger people in the morning…but there is a noticeable decline among older people after about 2 p.m.”

Fix: Avoid afternoon and evening sessions to review/sign important documents. Insist on morning sessions when researchers say you are at your peak.

According to Researchers: “Seniors are no more trusting than anyone else…But they tend to be more patriotic and more religious. and that translates to increased vulnerability to charity and other scams that play on these emotions.”

Fix: Recognize your susceptibility on this point and pay particular attention to pitches that play upon patriotism, government connection, or charity. An example from the realm of reverse mortgages: while it’s good to know that HECM reverse mortgages are “federally insured”, this fact should not have a major bearing on whether a HECM makes financial sense for you. Nor should the “government” connection be misconstrued as an endorsement or evidence that HECM reverse mortgages must be a good for seniors.