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Reverse Mortgage Fraud Schemes

Senior citizens are being defrauded by exploiting reverse mortgages (AKA Home Equity Conversion Mortgages- HECMs).  The perpetrators include unscrupulous real estate agents, loan counselors, loan officers, mortgage companies, investors, builders, appraisers and even developers.

The scheme-

Senior citizens are recruited through television, radio, billboard, and mailer advertisements, to commit the fraud primarily through equity theft, foreclosure rescue, and investment schemes. Equity theft schemes are the most common method used by mortgage fraud perpetrators. 

With the help of straw buyers, the perpetrators withdraw “false equity” from properties.  Using county deed records they identify buyers and foreclosed, distressed, or abandoned properties.  The home is then bought using a straw buyer who falsely states on a loan application that they will occupy the home as their primary residence.

Unsuspecting seniors buy the home from the straw buyer.  After the senior is living in the home for at least 60 days, the criminals arrange for the seniors to get a reverse mortgage.

An appraiser who is part of the scheme will inflate the appraisal by arranging for minor cosmetic repairs, or falsely documenting repairs, that were never performed. 

Once the loan is complete the senior who bought the home is convinced to take a lump sum from the reverse mortgage.  The perpetrators, who are usually in collusion with the settlement agent, take off with all of the equity at closing. 

Fictitious loans and liens are created that enable them to distribute the cash to themselves, the straw buyer, and others at closing. 

You can find out more by visiting The Home Equity Theft Reporter

Information for this series was gathered from mortgage fraud blog, the FBI 2008 fraud report and the IRS.

Home loans since 1977

  First Priority Financial is licensed by the California DRE # 654852  Nevin's California DRE license 016552

  The opinions expressed in this blog are not necessarily those of First Priority Financial.

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