For over half a century, reverse mortgage loans have enabled more than one million senior homeowners to convert a portion of their home equity into cash in order to supplement their retirement incomes. Reverse mortgages offer numerous advantages to borrowers, allowing them to retain ownership and live in their homes as long as they comply with loan terms. Senior homeowners commonly find this loan option very appealing because monthly mortgage payments are eliminated. Monthly payments are contingent on maintaining home as principal residence, paying all property taxes, and homeowner’s insurance, and otherwise complying with loan terms. Though proven helpful for many, the various advertised features and accessibility to cash makes some people wonder if a reverse mortgage loan is a scam or if it might be too good to be true.
While we have all heard stories about seniors being taken advantage of by dishonest salespeople attempting to sell them various financial products, a loan like this should not be considered a reverse mortgage scam. The federally-insured Home Equity Conversion Mortgage (HECM) reverse mortgage loan, created by the U.S. Department of Housing and Urban Development (HUD), has solidly proven its value to senior homeowners when processed by trustworthy and reputable lenders.
One of the most important things homeowners can do to protect themselves against scams and rip-offs is to identify a reputable lender to work with through the reverse mortgage loan process. But how can you verify that a reverse mortgage lender is in good standing, trustworthy and safe?
To begin your search for a dependable, respectable and safe lender, look for those who are:
Perhaps the first place you should check regarding a lender’s credentials is on the HUD website. Federal Housing Administration (FHA) approved lenders issue loans that are backed by the government, which means that they must apply and conform to federal standards.
When selecting a trustworthy lender, check to see if they are an active member of the National Reverse Mortgage Lenders Association (NRMLA). NRMLA is an association that establishes a strict code of ethics and professional responsibility particularly for the reverse mortgage industry. All lenders who are members of this association vow to present America’s senior population with the best possible financial product. NRMLA membership means that the lender has committed to the highest of ethical standards. You can locate lenders who are members of NRMLA at http://www.reversemortgage.org/FindaLender.aspx.
Another way to identify a reputable lender is to verify that they are fully accredited by the Better Business Bureau, also known as the BBB. The BBB is a nonprofit organization that encourages positive relationships between customers and businesses. With a higher business rating, the more likely it is you will have a positive experience with them. You may verify a lender on the BBB website www.bbb.org.
Double-check that a lender holds appropriate state and federal licenses. A well-qualified professional lender will be properly licensed to originate reverse mortgages, and will have their licensing information posted on their website and in their office. Each mortgage professional within the organization should be licensed to originate loans in your state as well, so be sure to ask for their Nationwide Multistate Licensing System, or NMLS, number.
Another important defense is to become as educated and informed about reverse mortgages as possible. Conduct your own research so you understand how a reverse mortgage works and how you qualify. Know what your obligations and requirements are as a borrower. Surf the web, read articles and watch videos to learn more. And, ask friends and family that may have a reverse mortgage about who their lender was and about their own reverse mortgage experience.
Call lenders on the FHA-approved list, and ask questions that are particular to your exact situation. Reputable lenders will be generous in offering free one-on-one phone consultations with reverse mortgage experts and encourage you to ask questions.
Lenders are also required by law to disclose the overall cost of credit, so take advantage of this opportunity to educate yourself on the fees involved, the qualifications needed, and the possible risks. Trustworthy lenders will also always disclose that you must go through mandatory counseling before applying for a loan. They will also reinforce that you must be financially able to comply with all loan terms, including covering property taxes, home insurance payments and home maintenance.
Be proactive! By taking charge to identify the right lender and getting educated about this viable financial planning tool, you will be well on your way to a safe reverse mortgage experience.