June 2009

Investment Scams

In a previous post, I discussed that we had a guest speaker from the CA Dept. of Corporations attend our Ventura County Adult Abuse Prevention Council (Whew! I know that’s a long name), breakfast and talk about various scams.

I shared some information on “affinity marketing” and how it was used against my own aunt, who fell victim to an investment scheme, along with all of their senior friends.   And yes, they all lost their money.

Tomorrow I will continue to share this information on other scams and continue to post something on each type over the course of the next couple of weeks.  And believe me, there are too many too mention.

So for tomorrow?  Maybe the “Free” Meals, Living Trusts and other seminars?   This would also include my own profession, Reverse mortgages.   My own industry has a group of individuals who aren’t professionals, pushy and dubious in their credentials and experience.

But it’s all about honesty and truly caring about the well being of your client.   Not about making  a sale.

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Financial Abuse, Seniors and Insurance Products

Originally when the first Reverse loans were available, some of the funds from the loan were used to purchase an annuity.   But, this has not been the case for many years, especially now that the federal government oversees the loan program and regulates it in a manner to protect seniors.

Since I have been in the industry, there have been many occasions when I have been approached by a Financial planner, wondering if I could refer my clients to them for the purchase of annuities or investments.

I would never suggest that funds from a Reverse loan be used this way & honestly, I’m offended by their suggestion.   Money that a senior receives from a Reverse loan are not intended to be used for  investments and certainly not for any annuities.   The only insurance product that I believe has any merit, would be Long Term Care, which I happen to have for myself.

The loan application and the loan documents, cover these issues very thoroughly and purchasing an annuity is not a condition to close on a Reverse loan.   If I am approached by anyone wishing to “team up” with me to sell their products, they get a very polite “no” and I also inform them that HUD will not allow this.

California is in the process of updating protections for the senior community through AB 329, The Reverse Mortgage Elder Protection Act. It was just passed by California’s Senate Committee on Banking, Finance & Insurance on June 16th. and is now on it’s way to the Committee on Judiciary for further consideration.

If this Bills passes, there will be a notice that must be provided by the Reverse loan lender, prior to any application.  Following is that verbiage:

Senior Citizen  advocacy groups advise against using the proceeds of a Reverse mortgage to purchase an annuity or related financial products.   If you are considering using your proceeds for this purpose, you should discuss the financial implications of doing so with your counselor and family members.”

Bill 329 was introduced by Mike Feuer to the California Assembly earlier in the year and is supported by the CA Nursing Home Reform & AARP CA.

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Scams, Fraud & Other Unsundery Things…..

A few “posts” ago, I mentioned that the Ventura County Adult Abuse Prevention Council that I am a Board member of, had an open meeting with a guest speaker form the CA Department of Corporations, discussing fraud and scams.

Since then, I’ve had some requests asking what some of those are and would I list them here?   There’s too many to go into any kind detail but I will shed some light on a few of them.   Needless to say, with the economy MIA, there is more fraud going on at this time than there was previously and now it’s more important than ever to be aware and protect yourself from becoming a victim.

We all have to be cautious, don’t give out your Social Security number to ANYONE and only use websites for purchasing items that are secure.   Look for the little “lock” sign, etc.  For this post, let’s discuss one area of deceit, fraud and other ugly crimes.   I will follow up a bit later with some more tantalizing examples of things to be aware of to protect yourself.

Common Investment Scams:

Affinity marketing & Affinity Fraud.  This is where there is some sort of mutual trust involved, via religious beliefs, ethnic makeup, culture or profession.   You can probably think of many examples of “affinity” relationships.  Sales people are hired just to court these special targets.   Typically what happens, as one person goes for the “bait” and feels good about their experience, they share this info with all of their friends, who of course will trust them, right?

My Aunt Audrie and her husband had this experience.   They were referred to a “financial advisor”  to set up some “retirement accounts” for them.   They were introduced to this individual through mutual senior friends who had also used his services and were very happy with him.

When I asked some very subtle questions  my Aunt was very cagey with me and didn’t want me to know what what going on.   I was highly suspicious but unable to do anything about it.   And guess how it all turned out?

He stole every one of those seniors’ money who had trusted him, put it into an account under his Mother’s name, spent it all.   And then?   When he was about to be investigated for fraud, he committed suicide.   And all the money that had been supposedly had been invested by him for his clients, was gone.

There was no recourse as his estate was bankrupt and none of the money could be located.   Apparently he spent it all drinking, dining and traveling.   And of course, he used it to impress new potential victims by treating them to expensive dinners and entertainment.

Over the next few days, I will continue to write about this serious issue.   Just writing about it now, raises my blood pressure.   This type of crime is unimaginable and cruel.   People work hard all of their lives, hoping to have enough funds for their retirement and then a predator comes along and takes it all away from them with a smile.

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Unemployed? Use a Reverse Loan.

It occurred to me that for people that have lost their jobs but have a mortgage payment on their home, should consider refinancing into a Reverse loan.   It’s the ideal solution for anyone that is 62 years of age or older and has a mortgage payment to make each month but are now unable to do so because they have lost their job.

As long as they have enough equity in the property this could relieve them of the worry  about how to make the mortgage payment and protect what little savings they still may have.  With a Reverse loan, there aren’t any payments and there are no prepayment penalties, either.  Making it very easy to prepay it when you have extra money or become employed again.

Unlike a traditional loan, the borrower doesn’t have to qualify for it using their “income” or credit…just be at least age 62.   As a matter of fact, they can even be in foreclosure and still qualify for the federal loan program.  And isn’t that good news?

And if the borrower finds employment, they can always pay the interest that is due on the loan each month, keeping the loan balance from growing.   But if they don’t have the money, they don’t need to be obligated to make any mortgage payments and continue to live in their home without any worries.

The fear of losing your home has suddenly disappeared!   It’s one less thing to concerned about while looking for employment.   And the best part is, is how easy it is to be approved.

The title will always be in the name of the borrower; the lender NEVER takes the property back at the end of the loan.   And the “end”?   There is no loan term.   The loan is in effect as long as you live and occupy the property.

Here’s the perfect answer to solve one large fear of being unemployed and more people should be open to it.  Don’t waste time, get the correct information and see if this would help.   No one wants to lose their home and they shouldn’t have to if the are age 62.

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Changes in Counseling for Reverse Loans

It seems almost every day, there is another change in the Reverse loan industry and in many ways these changes make it more difficult for a senior to apply for the federal program.

The latest “wrinkle” is that in addition to the normal telephone counseling that typically takes about an hour, they will also have to correctly answer 5 questions consisting of 10 that will be chosen from a list of 20.   AND IF THEY CAN’T ANSWER THEM, they will not be able to receive their HUD certification verifying that they have completed the required counseling.

At that point, if they have failed, they will not receive their certificate and will be forced to wait an additional 7 days to repeat the process all over again.   When you’re 80 years old and possibly desperate about having enough money, this creates undue anxiety and is totally unnecessary.

This kind of pressure on a senior isn’t reasonable and to me, seems questionable as well.   Personally, I always provide the mortgage comparison, a worst case scenario amortization sheet, a copy of a Good Faith Estimate and along with all of that, also a copy of AARP’s booklet “Homemade Money”.

I want to be confident that anyone I meet to discuss the loan program with, have a complete understanding of the pluses and minuses and if they will benefit from using it or not. If anything, I probably provide too much information and overwhelm them.   But I’d rather do that, than leave anything out and they can always call me with questions after I have met with them.

If there is some “slippery” Reverse loan consultant that isn’t qualified to be one to begin with,  that is attempting to rush a senior into the loan, then that is a questionable situation.   Seniors should be provided complete information, have all of their concerns and questions answered and never, never, never be pressured to do the counseling.

Maybe these questions might be of benefit to those seniors who have not been given adequate information at the point of the consultation but for my clients?   They are always prepared and are anxious to get their loan started in the process.

Feeling as though now, they may have face an “examination” in order to get their counseling certificate is unnecessary and implies that they are ignorant when it comes to making their own decisions.   Not to mention the additional pressure to not “fail” answering the questions.

Just another day in the life of the Reverse mortgage industry.   I’m sure that there will be more changes in the future, further making it difficult on the senior community.

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