Reverse mortgage scams: how to spot the pushy call or contractor pitch
Quick answer
Reverse mortgages are legal loans, but pushy calls, ads and contractors use them to rush older homeowners. Real lenders give you time. The VA offers no reverse mortgages. Don't sign anything under pressure: talk to a HUD-approved housing counselor first.
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How it works
A reverse mortgage lets homeowners aged 62 and older borrow against the equity in their home. The most common type is the Home Equity Conversion Mortgage (HECM). You don't make monthly payments, but interest and fees are added to the balance each month, so what you owe goes up and your equity goes down. The CFPB puts it plainly: it is not free money.
The loan itself is legal. The scams grow around it, and the FTC and CFPB describe a few patterns.
Contractors knock, call or send flyers offering home repairs, then suggest a reverse mortgage as the easy way to pay. This happens a lot after natural disasters.
Some ads falsely promise veterans special terms, imply VA approval or offer a "no-payment" loan. The Department of Veterans Affairs does not offer any reverse mortgage loans.
Salespeople also rush you to sign, or push you to put your loan proceeds into an annuity or long-term care insurance. You don't have to buy any other product to get a reverse mortgage.
What they're after is your equity: fees from a loan you didn't shop for, or money steered into products that pay the seller.
Red flags
- A cold call, flyer or ad about a reverse mortgage you didn't ask for
- A contractor who says a reverse mortgage is the easy way to pay for repairs
- Pressure to sign today, or to skip talking to a counselor or family
- A "VA-approved" or "no-payment" reverse mortgage for veterans
- Being told to buy an annuity or insurance product with the loan money
- No mention of fees, the growing balance or the HUD counseling session
Example message
Hello, I'm calling about the equity in your home. You qualify for a special no-payment loan, and there's a contractor in your area who can start repairs this week. This offer ends Friday, so call me back at [phone number] to lock it in.
What to do
- 1
Don't give details or sign anything
Hang up on the unsolicited call or close the door on the pitch. Don't share your Social Security number, home value or bank details.
- 2
Talk to a HUD-approved housing counselor
For a HECM you must meet a counselor from an independent, government-approved agency first. Counselors often charge around $125, and you can't be turned away if you can't pay.
- 3
Shop around and compare costs
Compare origination fees, interest rates, closing costs and servicing fees across lenders. If repairs are the goal, get quotes from several contractors and look at a home equity loan or line of credit too.
- 4
If you already signed, use your right to cancel
Most reverse mortgages give you 3 business days after closing to cancel for any reason. Tell the lender in writing, send it by certified mail and ask for a return receipt. The lender then has 20 days to return what you've paid.
- 5
If you suspect fraud, report it
Keep the ads, letters, call details and any paperwork, then file a report with the FTC.
Report it
Check if your details are exposed with Serus
Scammers find your number and address on data brokers and people-search sites. Serus removes them.
Why you got it
Callers and mailers who target older homeowners need to know who owns a home, how old they are and how to reach them. Property records and people-search sites list owners' names, addresses and phone numbers, and data brokers sell lists built from them. Serus finds the people-search sites and data brokers that list your address and phone number and requests removal, so fewer sales lists carry your details.
Frequently asked
Is a reverse mortgage itself a scam?
No. A reverse mortgage is a legal loan for homeowners 62 and older. It can be expensive and it uses up equity, so the FTC advises counseling and shopping around. The scams are the pushy sales tactics around it.
Does the VA offer reverse mortgages?
No. The CFPB says the Department of Veterans Affairs does not offer any reverse mortgage loans, and that some ads falsely promise veterans special deals or imply VA approval.
Can I cancel a reverse mortgage after I sign?
With most reverse mortgages you have 3 business days after closing to cancel for any reason, without penalty. You must tell the lender in writing. After that, get legal help to see whether you still have a right to cancel.
A contractor says a reverse mortgage is the easiest way to pay for repairs. Should I trust that?
The CFPB warns against contractors who push reverse mortgages to pay for repairs. Get quotes from several contractors and compare other financing before you agree to anything.
Sources
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