Recently, there has been a spate of publicity surrounding the practices of some mortgage lenders.
Many borrowers are feeling the pinch as interest rates on their variable rate mortgages rise, making it nearly impossible to keep up with the payments. As a result, foreclosures are on the increase.
However, even homeowners who have long since paid off their mortgages are in danger of falling prey to fraud. These older homeowners are seeking to tap the equity in their homes to assist with living expenses in their later years through a program operated by the Department of Housing and Urban Development.
Known as the Home Equity Conversion Mortgage Program, it allows homeowners age 62 and up to borrow against the value of their homes, either on a lump sum or monthly basis.
No repayment is required while the person lives in the home. The lender recovers the amount of the loan, plus interest, at the time the owner moves or passes away.
The amount that the elder borrows is determined by HUD's maximum limits, the value of the home (there are no limits currently on home values), the person's age and the prevailing interest rate.
So, what could possibly go wrong?
Certain companies, purporting to be estate planners, charge exorbitant rates to provide consumers with information about these so-called "reverse mortgages." But, according to HUD, the same information is available from them for free.
HUD is conducting an investigation of these firms, which have charged fees in excess of 10 percent of the borrowed amount, in some cases, for a service that seniors can receive at no cost.
Seniors are advised to seek information on the Home Equity Conversion Program directly from HUD at 888-466-3487, and to report any questionable practices by estate planning firms or lenders.
Most of the questionable activity has occurred outside the New England area, but seniors, their families and advocates should be aware that it could certainly happen here. If anyone pressures an older person to sign an agreement quickly or to accept a lump sum payment, those are red flags that more investigation needs to be done.
HUD has required that new mortgages insured by the Federal Housing Administration not come through companies that charge large fees for providing information that is publicly available to seniors for free. The directive will go to the 8,000 FHA-approved lenders around the nation, so consumers can soon have more confidence that they are not at risk.
Many borrowers are feeling the pinch as interest rates on their variable rate mortgages rise, making it nearly impossible to keep up with the payments. As a result, foreclosures are on the increase.
However, even homeowners who have long since paid off their mortgages are in danger of falling prey to fraud. These older homeowners are seeking to tap the equity in their homes to assist with living expenses in their later years through a program operated by the Department of Housing and Urban Development.
Known as the Home Equity Conversion Mortgage Program, it allows homeowners age 62 and up to borrow against the value of their homes, either on a lump sum or monthly basis.
No repayment is required while the person lives in the home. The lender recovers the amount of the loan, plus interest, at the time the owner moves or passes away.
The amount that the elder borrows is determined by HUD's maximum limits, the value of the home (there are no limits currently on home values), the person's age and the prevailing interest rate.
So, what could possibly go wrong?
Certain companies, purporting to be estate planners, charge exorbitant rates to provide consumers with information about these so-called "reverse mortgages." But, according to HUD, the same information is available from them for free.
HUD is conducting an investigation of these firms, which have charged fees in excess of 10 percent of the borrowed amount, in some cases, for a service that seniors can receive at no cost.
Seniors are advised to seek information on the Home Equity Conversion Program directly from HUD at 888-466-3487, and to report any questionable practices by estate planning firms or lenders.
Most of the questionable activity has occurred outside the New England area, but seniors, their families and advocates should be aware that it could certainly happen here. If anyone pressures an older person to sign an agreement quickly or to accept a lump sum payment, those are red flags that more investigation needs to be done.
HUD has required that new mortgages insured by the Federal Housing Administration not come through companies that charge large fees for providing information that is publicly available to seniors for free. The directive will go to the 8,000 FHA-approved lenders around the nation, so consumers can soon have more confidence that they are not at risk.
But, at this time, if you want to participate in this program, it's probably best to contact HUD directly and get the names of several approved lenders in your area.
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Anne Springer is the public relations director of SeniorCare Inc., which provides and coordinates services to elders, enabling them to live independently at home and remain part of their community. It serves elders in Beverly, Essex, Gloucester, Hamilton, Ipswich, Manchester, Rockport, Topsfield and Wenham and is a 501(c)(3) nonprofit corporation.
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