Borrower behavior before and after the loan can lead to these 5 avoidable mistakes
Continue reading5 Mistakes Reverse Mortgage Borrowers Should Avoid
Fraud Begins with Family
Fraud begins at home
Some adult children are especially anxious to get mom and dad’s inheritance. Others are so impatient that they take matters in their own hands- in effect receiving an early advance on their elder parent’s bequest.
This tragic drama of elder abuse plays out thousands of times each day while many regulators and lawmakers continue to portray financial and mortgage professionals as the typical perpetrators. After all, regulating these rapacious salespeople requires an army of regulators and enforcement officers.
So where can these heartless thieves typically be found? It turns out you don’t have to look far. Like most things, it begins at home. Michael Doll cites the National Council on Aging’s startling statistics which reveal nearly 90% of all financial crimes committed against elders are committed by family members. The familial hall of shame ranks the most likely players as adult children, grandchildren, and then nieces and nephews.
Many have witnessed the financial abuse inflicted by immediate family members. One series of incidents in my own neighborhood comes to mind in which a step-grandchild stole thousands of dollars from his elderly grandmother who was suffering the early effects of Alzheimer’s disease. “Grandma. Can I ‘borrow’ some money?” The problem is he never repaid her as her faltering recollection was that her trusted grandkid would have certainly paid back the last loan. He did not. And the deception continued for the better part of a year until a family member became aware of the scam.
In the process of completing the application and financial assessment, reverse mortgage professionals become acquainted with the homeowner’s financial assets. What red flags should they watch for? Here are just a few indicators of potential abuse.
- An adult child who is unusually interested when their parent will receive loan proceeds and how the money will be distributed.
- The presence of a child or grandchild living in the home who is abusing illegal or prescription drugs.
- The homeowner has little or no understanding of their own financial situation.
- The homeowner is showing the early signs of diminished mental capacity and confusion.
- Financial paperwork, checkbooks, and bank statements are disorganized and strewn about the kitchen or common areas.
- A non-medical assistant or living aid who seems overly-interested in the reverse mortgage transaction.
- Signatures on other documents appear to be written in another person’s hand.
- The senior appears to be isolated from friends and other family members.
As it’s said, ‘An ounce of prevention is worth a pound of cure’. Here are some suggested financial abuse prevention tips.
- Involve all children of the borrower when possible.
- Ensure all adult children know how to contact you.
- Ask if anyone has been managing their finances.
- Ask for details about any accounts showing late payments or delinquencies. See if the homeowner was aware of the unpaid installments.
Financial abuse awareness is crucial to help our older homeowners steer clear of family members plundering funds from what is perhaps their largest and last financial asset.
How have you spotted financial abuse and what did you do in response? Leave your answers below in the comment section.
Equal Disclosure Requirements for All
Older borrowers deserve to know their options before getting a traditional mortgage
Whether it is due to over-regulation, the sheer size of our housing bureaucracy, or crony capitalism, the mortgage marketplace is not a level playing field, especially when it comes to traditional and reverse mortgage lending. Despite the creation of the Consumer Financial Protection Bureau and other agencies created to protect consumers in the wake of the housing crash and questionable lending practices, problems remain.
Chief among those problems is the continuing lack of disclosure to older borrowers who cannot afford to choose the wrong mortgage option.
A level playing field in the mortgage marketplace is a noble concept that would place each player in a position to have an equal chance at succeeding abiding by the same set of rules. Unfortunately, such an aspiration is highly impractical in the mortgage marketplace as loan product features and risks vary wildly. Regardless, perhaps improved disclosure requirements should be required for traditional mortgage lenders, brokers and loan officers, just as HECM professionals will be required to disclose “all HECM products, features, and options that FHA insures.” Such a requirement may have prevented an 82 year old woman with a meager income and a part-time job from being placed into a 30-year mortgage- who a short time later lost her job and is now facing foreclosure.
Scam Alert: How to Keep Seniors Safer
Not long after filing his 2014 tax return, my father received a strange, somewhat sinister message on his answering machine: the IRS was going to sue him for back taxes! At 90, my dad is sharper than a premium kitchen knife, but he was still alarmed. Thankfully, he remembered what I’d told him about the Internet being a useful research tool. He typed the phone number of the purported IRS caller into a search engine, and the results screamed “SCAM!” It was a number in Washington, all right, but not Washington, D.C.: Washington State. And despite the many warnings about this well-known scam, even elders as alert as my dad fall prey to it every year.
But IRS scams aren’t the only ruse older adults need to watch out for. We’ve looked at ways to protect seniors from financial fraud as well as identity theft and property crime. Here’s a recap of six senior scams that reverse mortgage professionals can share with their prospects and clients to help them stay safe. You may wish to print this list and hand it out to seniors and their families:
1. “Grandma, can you loan me some money?” According to the National Council on Aging, scammers place a call to an older person and when the “mark” picks up, say something along the lines of: “‘Hi Grandma, do you know who this is?’ When the unsuspecting grandparent guesses the name of the grandchild the scammer most sounds like, the scammer has established a fake identity without having done a lick of background research.”
What to do: If you think the caller might actually be your grandchild, say, “Oh honey, I’m right in the middle of something! Give me your number and I’ll call you back.” A scammer will either hang up or try again to get you to guess their name. Hang up. Then call your local phone company and have Caller ID installed.
2. “You’ve just won our sweepstakes!” Though sweepstakes and lottery scams are old news, seniors still fall for them — along with the scammer’s request that they provide personal data so the winnings can be directly deposited into their bank account.
What to do: Hang up and install Caller ID.
3. “Look younger by Monday!” Fake anti-aging product scams are mushrooming in popularity, especially as the Boomer generation ages.
What to do: Buy and use only those products that have been vetted by a health care professional you trust.
4. Mock meds. Like fraudulent anti-aging products, counterfeit prescription drugs have proliferated as seniors increasingly shop online in order to save money.
What to do: Before buying a product that can harm your body as much as your pocketbook, check with your doctor or other healthcare provider to be sure both the product and the company are genuine. If you plan to do a lot of online shopping, open a separate checking account with a credit/debit card that you use only for this purpose; this way, any fraudulent charges will be easy to spot. In addition, keeping your online transactions completely separate helps protect your primary account(s) from being compromised.
5. “This car needs a lot of work.” An RV repair shop tried this on me when I brought a new-to-me camping van in for leaking A/C. Along with the bill, the shop presented me with a list of other “necessary” repairs totaling $2000! I told them if I’d thought the van needed that much work, I wouldn’t have bought it.
What to do: Have a younger family member or trusted friend negotiate any repair work (such as auto repairs or yard work), or ask someone you trust to review the estimate prior to giving the go-ahead to start work.
6. Upselling the bereaved. One of the most reprehensible scams involves preying on the grieving, by selling the most expensive funeral services, caskets, etc., or adding charges to the bill.
What to do: It’s difficult to think clearly while in deep grief. Ask a family member not as closely related to the deceased, or a trusted friend, to help with the arrangements.
These are some of the more common scams smart seniors should be aware of in order to keep their finances, property, health, safety, and sanity intact.