As most people know, a reverse mortgage is an insured program offered by the federal government intended to help seniors over 62 stay in their homes by using the equity they have built up over the years. It sounds like a great idea, and it is. However, seniors must make sure they do the proper research and ensure they are dealing with reputable parties to protect themselves from fraud. One senior that ran into trouble was told lies about reverse mortgages, an otherwise safe loan product for seniors, by a scammer with no connection to the reverse-mortgage industry who sought to commit theft.

Walter, an 85-year-old man who lived in West Hills, owned his home outright, but was having trouble paying his property taxes and utilities. Like many seniors, he was too proud to ask his grown kids for help, so when a con artist appeared at his door and told him what a reverse mortgage could offer him, Walter was more than interested. He had seen various personalities on television tell of the advantages of this government-insured program and thought he had found a solution to his financial woes. The crook told him all about the benefits of a reverse mortgage and that it was protected by the federal government – all music to Walter’s ears.

Having gained Walter’s trust and filled him with optimistic excitement, the crook then pulled his con. He told Walker he would have to have an 850 credit score to quality for a reverse mortgage. Walter knew he didn’t have good credit, and when he told the crook his credit score was not that high, he was told he was ineligible for a reverse mortgage. That is a lie. You do not have to have a credit check to get a reverse mortgage, although there will be a financial assessment done to see if you can maintain insurance and property taxes.

Disheartened, Walker’s ears perked up when the con man said he had an idea that may help him qualify. He told Walker that he himself had a credit score of over 850 and that they could use his credit to get Walter a reverse mortgage. The only thing Walker had to do was transfer the title of his home to him while the mortgage was being applied for. The con artist said that after the mortgage was approved he would then quitclaim the deed back to him. Walter agreed and transferred the ownership of his home to the scammer. The crook went directly to a bank, refinanced the mortgage on the house that was worth over $850,000, and took out a huge sum of cash. Three days later, he showed up at Walter’s home, transferred the title back to Walter, told him the paper work for his reverse mortgage would be coming in the mail, and disappeared. This thief left Walter holding the bag for a new mortgage he would have to pay off or lose his home – which he did.

While that story had a horrific ending, another ended on a positive note. I was contacted by some concerned folks who knew of an elderly homeowner, I’ll call Margret. In her 80s, Margaret owned a high-value property. I was told she was barely getting by on Social Security, that her house was falling down, and that she was way behind in property taxes. A reverse mortgage seemed to be the answer for her, since she owned the property outright. I put her in touch with a major reverse-mortgage company and they arranged for her property tax debt to be paid and a reverse mortgage to be instituted that gave her over $1,700 a month until her death. She used that money, along with her Social Security, to fix up her home and live a more quality life.

That is the way reverse mortgages are supposed to work.

A reverse mortgage can be the greatest thing for homeowners over 62 years of age who have equity in their homes. However, if your home is upside-down, meaning you owe more than it is worth, a reverse mortgage will not work. You also have to be very careful when shopping for a reverse mortgage that you don’t get caught in a scam like poor Walter. You must also know what to be on the lookout for when shopping around for a reverse mortgage, only deal with reputable companies, shop around and ask about interest rates and “other finance costs,” such as appraisals, escrow, title insurance, courier fees and recording fees. Be aware that all outstanding liens, taxes and mortgages need to be paid off as part of the reverse mortgage and remember: with a standard reverse mortgage, there is 1.25% on the outstanding loan amount that will be added to your balance annually as the FHA mortgage insurance. This insures and guarantees the loan so you can live in the house until you reach the age of 150, even if you run out of equity. You are also always free to sell your home and there is no pre-payment penalty.

When looking into a reverse mortgage, it is highly recommend that people have an attorney, knowledgeable family member, or some trusted advisor to assist them. They should also know about the National Reverse Mortgage Lenders Association and their helpful website (reversemortgage.org) that will point them in the direction of reputable NRMLA member lenders who are bound by a code of ethics and professional responsibility.

If you have a consumer complaint you would like Judd McIlvain to look into, click on his Web site at www.TroubleshooterJudd.com for contact information and to tune in to his Internet talk show on Wednesdays at 1 p.m.