When A Reverse Mortgage Insurance Is Necessary

A reverse mortgage insurance plan may not be something that is necessary or even available to you if you have a reverse mortgage. A reverse mortgage, which is a program guaranteed by the Federal Housing Administration or FHA, through the U.S. Department of Housing and Urban Development (HUD), is available to seniors age 62 and older. This program provides a tax-free income for life based on the value of a home. With a reverse mortgage, seniors are able to access the cash in their home without fear of having to sell or lose the home.

Organizations Participating in Reverse Mortgages

There are organizations and interest groups that work with FHA lenders that participate in the reverse mortgage program to protect the interest of seniors who have reverse mortgages. Groups such as AARP and the National Reverse Mortgage Lenders Association offer counseling and education programs designed to protect seniors from fraudulent and abusive schemes designed to take away their home.

Fraudulent Reverse Mortgage Insurance Schemes

During the sub-prime mortgage crisis, companies offering mortgage-relief programs targeted seniors with promises to pay mortgages and get cash back in the forms of tax-free income, similar to the goals of the reverse mortgage program. They used names such as reverse mortgage insurance, which provide a way for a borrower to protect the value of the home’s equity and borrow it to use for other purposes.

The problem with these programs or schemes was the senior would unknowingly sign away deed and title to the companies and after receiving a couple of payments would face a foreclosure situation as the equity would be borrowed against and the insurance did not exist. This has led to a FBI task force that has worked to arrest and detain those individuals who engaged in the abusive scheme and defrauded seniors from their home.

Information About Reverse Mortgages

An internet query on reverse mortgage insurance will not yield many results or programs that truly offer this type of protection. When a senior applies for a reverse mortgage, the lender looks at the value of the home relative to the individual’s life expectancy to determine the amount of payments. This is similar to the process that an insurance company uses to make payments on an annuity contract. Since the dollar amount of payments is established at the time of application, the lender takes on the risk of falling home values in the market. The payments to the senior are guaranteed and there is no risk of home loss.

Ask questions and be weary of someone who offers you a reverse mortgage insurance plan. This could possibly be a scam or fraudulent scheme and should be reported immediately to your local state office on aging, AARP or to FHA.

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