Consumer Alert: Home Equity Stripping Scams

The Office of Fair Housing & Consumer Affairs, Department of Community Development, City of Cleveland, is issuing a CONSUMER ALERT regarding remodeling contractors who convince seniors that their homes can be repaired and/or remodeled for free without the consequences of a loan or mortgage.

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In Cleveland neighborhoods, The Office of Fair Housing & Consumer Affairs has received complaints from seniors who were unaware that they had signed reverse mortgages after being solicited by remodeling contractors to do work on their homes.

In some cases, the contractors have taken all the proceeds from the senior homeowner and performed little or no work. The Office of Fair Housing & Consumer Affairs has concluded from the cases that it has examined that there is an inherent conflict of interest when contractors and/with mortgage brokers (and their representatives) steer senior homeowners into reverse mortgages.

These contractors have told seniors that there is an FHA program (Federal Housing Administration) that will provide funds to repair their homes with no monthly payments; no credit required, no income required or payback leaving the seniors with the false conclusion that they are receiving the remodeling work for free or that it is being paid for by “the government” when, in fact, the repairs are being paid for by the senior with a Home Equity Conversion Mortgage (HCEM).

“The FBI and the U.S. Department of Housing and Urban Development Office of Inspector General (HUD-OIG) urge consumers, especially senior citizens, to be vigilant when seeking reverse mortgage products. Reverse mortgages, also known as home equity conversion mortgages (HECM), have increased more than 1,300 percent between 1999 and 2008, creating significant opportunities for fraud perpetrators.

“Reverse mortgage scams are engineered by unscrupulous professionals in a multitude of real estate, financial services, and related companies to steal the equity from the property of unsuspecting senior citizens or to use these seniors to unwittingly aid the fraudsters in stealing equity…

The Office of Fair Housing & Consumer Affairs advises seniors to avoid accessing Reverse Mortgages through or on the advice of Home Repair or Home improvement contractors. If you are considering a Reverse Mortgage (Home Equity Conversion Mortgage HCEM), seek out a qualified reverse mortgage counselor from a legitimate agency such as Neighborhood Housing Services of Greater Cleveland.

Do not seek or listen to advice from anyone who is connected to the mortgage company such as a “steerer” at your church or a contractor or his/her “steerers”. [A “steerer” is a person who testifies and endorses a product or service and who may or may not be compensated for providing leads to a products or service provider such as a contractor or mortgage company.]

Don’t know who to call? Call:

Department of Community Development

Office of Fair Housing & Consumer Affairs

601 Lakeside Avenue, Room 320

Cleveland, Ohio 44114

Phone: 216-664-4529 

 

One thought on “Consumer Alert: Home Equity Stripping Scams

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