Measure Would Shield Seniors From Reverse Mortgage Scams

The Senate approved a bill Friday intended to protect the elderly from con artists who charge exorbitant fees for reverse mortgages that provide cash to older homeowners.

The legislation, approved on a voice vote, is an attempt to halt “thieves, con artists, swindlers masquerading as helpers to the elderly who are really nothing more than rip-off artists,” said Sen. Alfonse D’Amato (R-N.Y.) the bill’s key sponsor.

The fraud typically involves thieves who offer to help elderly people obtain a reverse mortgage and charge 10% of its amount--$5,000 on a $50,000 mortgage--for their advice, D’Amato said. They often fail to say that there will be a fee or that such advice is available free, he said.

“We’re going to slam the door on these scam artists, these loan sharks,” said Sen. Christopher Dodd (D-Conn.), a co-sponsor.

Sixty percent of reverse mortgage borrowers are women living alone, and 12% are men living alone. These people are mostly widows and widowers, D’Amato said, adding, “What inviting targets they are.”

The bill would require that homeowners be told of all costs for getting reverse mortgages and would authorize the secretary of the Department of Housing and Urban Development to ensure that homeowners not pay any unnecessary or excessive costs.

Reverse mortgages, introduced by HUD in 1989, are designed to help cash-strapped elderly homeowners borrow against the equity in their homes. The loans are federally insured, and the lender is repaid with interest when the homeowner dies or sells the property. Government-approved counselors provide information on reverse mortgages at little or no charge.