When given the opportunity, criminals will target whom they perceive as the weakest among us. And that notion could become even more apparent as Utah and the nation cope with the bursting of the real estate and economic bubbles.

The Salt Lake office of the Federal Bureau of Investigation and the Utah Division of Real Estate have compiled a list of the potential top five mortgage related rip-offs in 2010. Chief among them: a reverse mortgage scam targeting the elderly.

“Scam artists are always looking for new ways to reinvent the same crime,” said Michelle Pickens, special agent and mortgage fraud coordinator with the FBI. “The reverse mortgage scam is based off the ’straw buyer’ model where they use senior citizens … against their own mortgages.”

Reverse mortgages can be a legitimate way for homeowners to take equity from their homes without a monthly payment, which can be especially useful to seniors who need supplemental income during retirement, she said.

Unfortunately, con artists sometimes convince seniors they can live in a home for free, obtain a home loan under the occupant’s name and disappear with the equity, while leaving the victim to repay the mortgage.

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Taiwan may allow reverse mortgages to support the island’s aging population, Ministry of Interior Chief Secretary Weng Wen-te said, following similar plans in the U.S., Australia and Singapore.

One in 10 people in Taiwan were 65 and older in 2008, and that may rise to 14.7 percent in 10 years, according to a report by Taiwan’s Council for Economic Planning and Development. By 2056, they will make up 37.5 percent of the population, it added. The mortgages allow homeowners, usually retirees, to borrow money in the form of annual payments that are charged against the equity of the properties.

“Taiwan’s population is aging too quickly,” Weng said today in a phone interview in Taipei. “Some of them may not have any savings other than their property, so we are considering this policy.”

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Simply the idea of having the bank send a home owner a check every month for living in the home in which they have built equity to many sounds like a great way to help cover expenses in retirement years. Home Equity Conversion Mortgages (HECM), the so-called reverse mortgage, are not new. Recent months have propelled these loans more into the spot light as brokers and lenders scrambled for ways to continue in business after the bubble.

Essentially the HECM is a refinance loan which works in the reverse manner from a standard home mortgage. Instead of the home owner leveraging the equity in their property and borrowing a lump sum using their home as collateral the lender will send a check to the home owner on a monthly basis and slowly consume the equity.

Home owners must have reached a minimum amount of equity in their home and have reached retirement age which automatically gives an air of suspicion to the loans. The Department of Housing and Urban Development has not always insured this type of mortgage but their entry into the marketplace with their HECM has offered more of a safety net to borrowers.

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Reverse mortgage was introduced in 2007 here. The concept is aimed at senior citizens who can generate income from their homes in their retirement years.

How it works

If a senior citizen owns a house, he can avail a loan from a bank by mortgaging his house. In a conventional home loan, the borrower receives a lump sum at the beginning of the loan tenure. He has to repay the loan through monthly EMIs where a portion goes towards the interest component and the remaining towards principal repayment . The house is pledged with the lender during the debt tenure.

In the case of reverse mortgage, a senior citizen pledges a property he owns for which the lender gives a series of cash flows for a fixed tenure.

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Australia’s reverse mortgage market is now valued at $2.6b after recording a growth rate of 5% in the six months to 30 June 2009, a new study by Deloitte Actuaries and Consultants has revealed.

The Deloitte SEQUAL Reverse Mortgage Study showed that the market consisted of more than 38,000 reverse mortgage facilities at the end of six-month period.

According to James Hickey, the Deloitte Actuaries and Consultants partner who led the study, there were 2,350 new borrowers of reverse mortgages in the first half of 2009 compared with 2,600 in the second half of 2008. He continued, “This shows that the product is still in demand by borrowers, albeit at a slower rate than in the previous six months.”

Kevin Conlon, chief executive SEQUAL hailed the results of the Deloitte study “as testament to the fact that seniors equity release continues to emerge as a key retirement funding option”. He added, “The sustained, albeit slower market growth over the last six months, demonstrates to us the important role equity release continues to play in assisting Australian seniors to face the challenge of funding their retirement.”

The report revealed that most reverse mortgage business came from New South Wales (33%), with Queensland (16%), and Victoria (14%). NSW increased its share of new lending by almost 10% since 2008.

Found here.

Such loans can be a nice tool for seniors who grasp their features and drawbacks

As the worst financial crisis since the Great Depression guts real estate values, hammers 401(k)’s, and drives job losses higher, a disconcerting number of older Americans are facing a threat they never expected to encounter during their golden years: home foreclosure. In a first-of-its-kind study released last fall, AARP reported that Americans ages 50 and older accounted for more than a quarter of all home foreclosures and mortgage delinquencies in the second half of 2007. “The impact of a foreclosure is often more significant for older households, as they have less time and ability to recover the financial losses,” the report concluded. “The problem is likely growing, as homeowners increasingly carry mortgage debt into their retirement years.” But a unique type of loan enables seniors 62 years and older with enough equity in their home to tap a sizable chunk of cash and kiss their house payments goodbye. And for those who understand its features—as well as its risks—a reverse mortgage can be a valuable tool for reducing the financial pressures that arise in modern-day retirement.

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As Congress returns from its break, it will soon have to vote on the Appropriations Act 2010. This Act involves the subsidization of the reverse mortgage program of HUD, called the Home Equity Conversion Mortgage (HECM). Also at stake is the lending limit. At present, Congress is divided as to what it may do.

What’s at Stake

A lot is at stake with the vote that will have to take place to iron out the details and come to a general agreement. Depending on which elements of the Bills are eliminated, it seems that seniors will be the ones paying the cost either way. What has to be determined now in Appropriations Act 2010 is how much they will be hurt by the national reverse mortgage package.

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Reverse mortgage of property allows retired people to get monthly payments from banks while contunuing to stay in their home. To make this unique concept popular, there is need to create more awareness, writes Suresh Nandi

Reverse Mortgage Loan (RML) scheme launched with much fanfare in 2007 by the UPA Government has failed to take off in a big way due to variety of factors. Main reason was the lack of proper packaging and information dissemination to the target group. Considering RML was described as a saviour to the growing population of senior citizens — whose number is set to rise up to 140 million by 2016 in India — is the scheme still waiting for the much needed momentum to take off.

In simple terms, RML is a loan against your home that you do not have to re-pay as long as you live in that place. The concept is new in India and it allows senior citizens to unlock the value of their most valuable asset (their home) by mortgaging it. As they keep getting money from the bank for a pre-decided period, they can continue to live in the house until death. It helps them benefit from the long-term appreciation of their house too as a tangible asset by turning it into a source of much needed funds, post-retirement.

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The housing bubble, lax regulatory oversight and an influx of shady loan professionals have made lawmakers uneasy about the safety and soundness of the popular government-backed reverse-mortgage program.

At a hearing a couple of weeks ago in St. Louis, the U.S. Senate Special Committee on Aging, chaired by Sen. Claire McCaskill, D-Mo., heard government officials and consumer advocates discuss a number of problems with the program, including aggressive marketing tactics, fraud and taxpayer liability for loans on homes whose values have plummeted.

Reverse mortgages typically allow homeowners who are 62 and older to borrow against their home equity without having to repay the money until the home is sold or the borrower dies or permanently moves out.

Reverse mortgages can provide cash to help seniors pay for medical expenses or home improvements or simply to live more comfortably.

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Tapping into home equity may seem like an easy way to gain extra cash but mistakes can cost you dearly.

Cash-strapped retirees are turning to reverse mortgages to fund everyday expenses in the belief that tapping into their home equity is the only option. And while a reverse mortgage may be the perfect solution for some, mistakes can be costly.

Reverse mortgages allow people older than 60 to borrow against the equity in their home, with repayment, including interest and charges, deferred until they sell their home or it is vacated permanently.

Recently the Australian Securities and Investments Commission (ASIC) launched a new guide to help explain reverse mortgages. This followed a similar initiative by the National Information Centre on Retirement Investments (NICRI) earlier this year.

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