Older adults are, sadly, often the targets of scams, because they are often too trusting, yet they also worry about maintaining their lifestyle on a fixed income. Scam artists and predatory lenders that appear to be legitimate and consumer-friendly can often be just the opposite. To protect yourself and your loved ones from reverse mortgage scams, become armed with facts and be able to identify red flags before you part with too much of your hard-earned money.

Warning Signs

Anyone asking for a fee to help you find a reverse mortgage lender or set you with a reverse mortgage is someone from whom you should stay far away. The U.S. Department of Housing and Urban Development has counselors and offices that provide this kind of service for free. HUD actually insures almost all reverse mortgages, so starting your investigation into this field with a HUD representative is a good idea.

Similarly, if you are talking with a representative of a financial institution or a financial advisor and he starts recommending a specific reverse mortgage lender, understand that he is probably recommending that person in hopes of getting a commission of some kind. The person or institution he recommends may be legitimate, but if he’s looking to get a commission or some kind of financial reward, that is his priority, not your best interests.

And, as with most things in life, if a reverse mortgage deal sounds too good to be true, it probably is best to avoid it. Understand that a lender who promises amazingly low rates may be looking to make up that money with high closing costs and fees. Talking with a HUD representative should help you understand about reasonable terms and fees.

Read the Fine Print

Speaking of fees, understand that the closing costs associated with a reverse mortgage are usually incorporated into the loan payment you receive, so there should be few out-of-pocket expenses for the homeowner. If your lender starts listing fees that must be paid up front, walk away.

You should also avoid anyone who talks about a payment plan on your reverse mortgage. The whole point of getting a reverse mortgage instead of a traditional home equity loan or line of credit is that you don’t have to make monthly payments. The loan is repaid at the time the house is sold or is no longer the homeowner’s primary residence.

Shop Around to Avoid Scams

Predatory lending practices are in play everywhere, so there are lenders out there looking to maximize profits by piling on the costs for homeowners. Do not jump at the first lender who sounds like he’s offering you a good deal. Just as you would compare car prices from one dealer to another, so too should you see what various lenders and institutions will offer for reverse mortgages. You may be surprised about the range in costs and in interest terms.

Also, look for a lender who is a member of the National Reverse Mortgage Lenders Association (NRMLA). The NRMLA has a Code of Ethics its members must follow and that’s aimed at protecting the consumer.

When You Have Questions

Sometimes trusting your gut instinct or that little voice in your head warning you of trouble is the best approach to any new situation. If something doesn’t seem quite right about the people you’re dealing with:

Seek advice from people you know and trust. If a family member or friend is knowledgeable in this area, bring him or her along when you talk with lenders or as you go through the application paperwork. Even if your friend or relative has no direct experience with reverse mortgages, any background in finance or real estate will help.

Talk with someone at your bank who handles home loans. Even if you don’t end up getting a reverse mortgage with that bank, you can still try to get some basic information to help you through the process and to give you peace of mind.

If You’ve Been Scammed

If you think you’ve been taken advantage of in a reverse mortgage deal or you find yourself in the middle of the process and don’t feel right about what’s going on, stop and talk to a HUD office in your area.

You may also want to contact the local Senior Services office in your community. A state or municipally run agency will not only want to know about scams targeting older adults, but they may have resources available to help you out.

Never feel embarrassed about being scammed or even just having suspicions. Plenty of educated and sensible seniors run into similar problems every day.