February 11, 2012
The recent conviction of a Delray Beach loan officer for his participation in a scheme to persuade seniors to refinance their reverse mortgages should serve as a warning to the friends and relatives of elderly persons about the surprising ease with which senior homeowners can be exploited.
That the loan officer and his co-conspirators, including a real estate title agent, were fabricating loan applications and pocketing the money casts a pall over the entire lending business. And with good reason, according to the National Council on Aging, which ranks homeowner/reverse mortgage scams as the eighth most prevalent scam targeting seniors.
But rogue mortgage professionals aren't the chief perpetrators of elder abuse.
According to MetLife's Mature Market Institute, about 60 percent of the financial abuse cases substantiated by adult protective services involve an adult child. Sons are most likely to rip off their parents or grandparents, the study found, even more so than a paramour, bogus contractor, fly-by-night handyman or shady lender.
If a senior is considering a loan that taps into their home equity, here are a few questions family members and friends can ask to help prevent exploitation:
a. Does the senior understand the loan? This is something that will be covered in a session with an independent housing counselor that is mandatory under the Federal Housing Administration's Home Equity Conversion Mortgage program. But make sure your mom, dad, grandparent, aunt or uncle knows what he or she is getting into before getting that far into the process.
Of course, this implies that your senior is willing to discuss his or her financial situation. Many keep that information to themselves for fear of losing their independence. But if you can get them to open up, you can discuss the pros and cons of reverse mortgages with them to be sure all of you understand the product.
If the senior doesn't fully comprehend the nature of a reverse mortgage, that doesn't mean it isn't a good fit. It might just mean further education is needed, says Lori Delagrammatikas, who oversees the master's program in adult protective services at the San Diego State University Research Foundation.
At the same time, the desire to take out a loan they don't fully comprehend could be a sign that something else is going on.
Loneliness and isolation raise the risk of elder financial abuse, which covers theft, misuse of financial instruments such as powers of attorney, investment fraud, home-repair schemes and identity theft. The high rate of dementia among seniors makes them a tempting target, especially when they own their homes free and clear and have good credit ratings.
b. Who is going to benefit? Find out who the real beneficiary will be and why. If it's not the senior, your antennae should wiggle.
In one case, a 65-year-old woman was coaxed into taking out a $100,000 lump-sum reverse mortgage by her son, who proceeded to gamble away the money. The son was charged with criminal elder abuse and spent time in jail, but the money was never returned.
A Montana woman recently was convicted of bilking her elderly mother out of $120,000 from the proceeds of a reverse mortgage. The mother suffered from Alzheimer's, and prosecutors argued she did not have the capacity to appreciate or understand the loan. The conniving daughter used the money to pay off her own credit cards, buy jewelry and stable her horses, among other things.
Red flags for this kind of abuse include caregivers who isolate elders from family and friends, newfound anxiety about their finances, new "best friends," missing belongings, or missing statements or other documents from banks or investment advisers.
c. Is the senior being coerced? Determine if your senior is being pushed into the loan, and, if so, by whom.
In another case, an elderly couple turned over the proceeds of their reverse mortgage to their grandson, who had threatened to commit suicide if they didn't give him the money. It also appeared that some of the loan documents in this case were forged.
Be particularly aware of in-home helpers, including personal care attendants and meal service providers, who have access to the senior's financial papers and identifying information. Pay special attention to those hired directly from newspaper ads or referral services not screened or supervised by a government agency.
If you suspect your senior is being taken advantage of, contact the adult protective services agency in your state. APS programs are typically housed within local or state departments of social services or aging. Further information can be found on the National Center on Elder Abuse's website, ncea.aoa.gov
SOURCE: The Herald Tribune
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