Sandy Hutchens relates the following story: A Long Island women who stole the home of a 93-year-old barber with Alzheimer’s was recently convicted. It is shocking how easily some elderly homeowners can be exploited financially.
A recent report has stated that the elderly have been victimized by $2.6 billion a year which is a conservative guess since it has been estimated that 1 in 25 cases of financial fraud is actually reported to the authorities.
At a conference in San Diego of experts in reverse mortgages lenders were asked to help unmask fraud schemes designed to scam unsuspecting and overly trusting seniors.
Consider the irony that lenders, particularly those who deal in complicated mortgages that
don’t have to be paid back until the borrower dies or moves away of his own volition, often rob the elderly with their “backwards” loans.
“There’s an epidemic of financial elder abuse, but the chief perpetrators
aren’t lenders. It’s family members,” said Lisa Nerenberg, a consultant who headed the San Francisco Consortium for Elder Abuse Prevention, one of the first such programs in the country.
The Study confirms that: “Approximately 60% of the substantiated Adult Protective Services’ cases of financial abuse involve an adult child, compared to 47% for all other forms of abuse.” Sons are most likely to scam their elders, the study found, even more so than a “lover” in a “sweetheart scam”, a phony contractor or a fly-by-night handyman.
The reverse lending community is not without its share of abuse. Recently the government pulled the plug on a Honolulu-based company which allegedly “duped” seniors into using the proceeds of their federally insured reverse mortgages to purchase annuities from an affiliated insurance firm. In one instance, the company supposedly “steered an 88-year-old borrower into purchasing an annuity which did not mature until she reached her 104th birthday.”
According to Nerenberg, most lenders are legitimate. And as such, they are “in an excellent position to spot” and report crimes against seniors.
Peter Bell, the president of the reverse mortgage lenders trade association, doesn’t disagree. “We have a professional responsibility to spot and report financial crimes against the elderly,” he says.
Lori Delagrammatikus, who oversees the masters program in adult protective services at the San Diego State University Research Foundation, says that seniors who are thinking of taking a reverse mortgage should ask the following four questions:
1. Do they understand what it is? This is something that will be covered in a session with an independent housing counselor that is mandatory under the Federal Housing Administration’s Home Equity Conversion Mortgage program.
But lenders should make sure the senior knows exactly what he or she is getting into before getting that far into the process.
If the senior doesn’t fully comprehend the nature of a reverse mortgage, that doesn’t mean it isn’t a good fit. Rather, it might just mean they need further education, says Ms. Delagrammatikus. But the desire to take out a loan they don’t fully comprehend also could be a sign that something else is going on in their lives.
Loneliness and isolation raise the risk of elder financial abuse, which covers a lot of territory, including theft, misuse of financial instruments such as powers of attorney, investment fraud, home repair schemes and identity theft. And the high rate of dementia make seniors a tempting target, especially when they own their homes free and clear and have good credit ratings.
2. Who is going to benefit? Find out who the real beneficiary will be and why. “If it’s not the senior,” Ms. Delagrammatikus warns, “look at it twice.”
In one recent case sited by the elder abuse specialist, a 65-year-old woman was coaxed into taking out a $100,000 lump sum reverse mortgage by her son, who proceeded to gamble the money away in Las Vegas. The reprobate son was charged with criminal elder abuse and spent some time in jail, but the money was never returned to his mother, who is now losing more than $3,000 of her equity every month.
Incidentally, the granddaughter insists the loan broker in this case should have been able to protect the borrower from her son because the broker knew the money was going to him rather than her.
Red flags for this kind of abuse include caregivers who isolate elders from family and friends, newfound anxiety about their finances, new “best friends,” missing belongings, or no longer receiving statements or other documents from their banks or investment advisors.
3. Is the senior being coerced? Determine if your senior is being pushed into the loan, and if so, then by whom.
In another case cited by the SDSU Foundation official, an elderly couple turned over the proceeds of their reverse mortgage to their grandson, who had threatened to commit suicide if they didn’t give him the money. It also appeared that some of the loan documents in this case were forged.
Be particularly aware of in-home helpers, including personal care attendants and meal service providers, who have access to the senior’s financial papers and identifying information. Especially those hired directly from newspaper ads or referral services not screened or supervised by a government agency.
“Use the ‘mom standard,’” says Ms. Delagrammatikus. “If you see someone treating an elder in a fashion you wouldn’t want your mother treated, report it. All reports are confidential.”
4. Can the senior’s need be solved in another way? There are several alternatives to reverse mortgages. Even Mr. Bell, the industry spokesman, concedes that reverse mortgages are “by no means the only solution.” Rather, he says, the loans “need to be looked at in a broad context as people manage their longevity.”
Ms. Delagrammatikus once counseled a 73-year-old woman who wanted to obtain a reverse mortgage to pay for a new roof but was concerned that the proceeds would result in the loss of state insurance coverage for her husband.
“I suggested that she forgo the pricey reverse mortgage and instead apply for a 0% deferred payment rehab loan though the city,” says the adult services professional. “I also made her aware of the Medi-Cal Community Spouse Resource Allowance, which allows her to keep over $100,000 in assets for herself while her husband resides in a nursing home.”
While these benefits are city and state specific, many jurisdictions offer similar programs to help their financially strapped senior citizens.