Senior citizens looking to make ends meet by borrowing off the value of their homes should beware of scam artists _ and so should the institutions making the loans, the government warned Monday.
Several private companies are accused of charging seniors thousands of dollars for simply providing information about reverse mortgages _ information the Department of Housing and Urban Development gives out free, said Secretary Andrew Cuomo.
Now, HUD is prohibiting all Federal Housing Administration-approved lenders from dealing with such companies. Any lender that knowingly does will be barred from future HUD programs.
"These are senior citizens who are looking at this program precisely . . . because they don't have the funds to pay their bills on a day-to-day basis, a month-to-month basis," Cuomo said. "When this population is victimized, it's even more egregious because, again, this is a population that needed help."
HUD estimates "a couple hundred" of elderly homeowners have been victims of the scams.
The department introduced reverse mortgaging in 1989 to help homeowners 62 years and older exchange equity in their homes for cash payments made in lump sums, monthly stipends or a line of credit.
The loan arrangement is complete when the homeowner dies, moves or sells, and the loaning agent recovers the loan plus interest from the home.
The concept is especially appealing to senior citizens who have paid off their mortgage yet have a hard time making ends meet.
But in the past few weeks, HUD has learned of several companies that charge seniors as much as 10 percent of the amount borrowed just to provide them basic information that HUD-approved housing counselors give for free or a small cost, Cuomo said.
It's a scam that is "literally charging them thousands of dollars for nothing," said Cuomo, who is working with Rep. Rick Lazio, R-N.Y., on legislation to outlaw such practices.
Mickey and James Kimberlin from Las Vegas said they paid $2,400 to such a middleman. When the couple refused to pay up, the company threatened litigation.
Cuomo said HUD is investigating ways to recoup losses and prosecute offending companies.
_ HUD has established an information and complaint phone line at (888) 466-3487.