Reverse Mortgage Scams: Warning Signs and How to Avoid Them

3 October 2025

Reverse mortgages can be a lifesaver for seniors looking to tap into their home equity and enjoy a more comfortable retirement. But, like anything involving money, scammers are lurking in the shadows, waiting to take advantage of unsuspecting homeowners.

If you're considering a reverse mortgage—or if you have a loved one who is—it’s crucial to be aware of potential scams. In this guide, we’ll walk through common reverse mortgage scams, the red flags to watch out for, and how you can protect yourself from becoming a victim.

What Is a Reverse Mortgage?

Before we dive into scams, let’s briefly cover the basics of a reverse mortgage.

A reverse mortgage is a loan designed for homeowners 62 and older, allowing them to convert part of their home’s equity into cash. Instead of making monthly payments to a lender, the homeowner receives payments, which can be structured as a lump sum, monthly installments, or a line of credit. The loan is repaid when the homeowner sells the home, moves out, or passes away.

While this financial tool can be helpful, it has also become a prime target for scams. Predatory lenders, fraudsters, and even corrupt family members have found ways to exploit the system and cheat homeowners out of their money or property.

Common Reverse Mortgage Scams

Knowing what to look out for is the first step in protecting yourself. Let’s go over some of the most common reverse mortgage scams that have tricked seniors in the past.

1. Equity Theft Scams

This type of scam often involves a third party convincing a senior to take out a reverse mortgage and hand over the proceeds, either under false pretenses or through coercion. These scammers might pose as financial advisors, home repair companies, or even family members offering "help."

🚨 Red Flag: Someone pressures you to take out a reverse mortgage and insists that you hand over the proceeds for an investment, home repair, or another purpose.

2. Fake Reverse Mortgage Lenders

Some scammers impersonate legitimate lenders and trick homeowners into signing up for a bogus reverse mortgage. They may ask for up-front fees or even transfer the home title into their name.

🚨 Red Flag: If a lender demands up-front fees before processing the loan, it’s likely a scam. Also, if they refuse to provide documentation or pressure you to act quickly, be suspicious.

3. Foreclosure Rescue Scams

Seniors facing foreclosure may be targeted by fraudsters pretending to offer a helping hand. They promise that a reverse mortgage will allow homeowners to stay in their home, but in reality, they use confusing legal paperwork to steal the property.

🚨 Red Flag: Anyone who claims they can "save" your home from foreclosure but requires you to sign over the title is not looking out for your best interests.

4. Contractor and Home Repair Scams

Some scammers pose as home improvement specialists, recommending unnecessary renovations and persuading seniors to take out a reverse mortgage to finance them. Once the loan is secured, the contractor either does a poor job or disappears altogether.

🚨 Red Flag: A contractor suggesting a reverse mortgage as a way to finance repairs (especially if they are unsolicited) should immediately raise suspicion.

5. Heirs and Family Manipulation

Unfortunately, some scams don’t come from outsiders but from family members. A dishonest family member may manipulate a senior into taking out a reverse mortgage and then pocketing the money for themselves.

🚨 Red Flag: If a relative pressures you to take out a loan and give them the money, consider seeking financial advice from a trusted professional.

How to Avoid Reverse Mortgage Scams

Now that you know some of the common scams out there, let’s talk about how to stay one step ahead of the fraudsters.

1. Know Who You’re Dealing With

Always research the lender before signing any paperwork. Make sure they are approved by the Federal Housing Administration (FHA) and check for reviews or complaints through organizations like the Better Business Bureau (BBB).

2. Never Pay Up-Front Fees

Legitimate reverse mortgage lenders do not require large up-front payments. If someone asks you for money before processing your loan, walk away—it’s likely a scam.

3. Beware of High-Pressure Sales Tactics

Scammers thrive on urgency. If someone is pressuring you to “act fast” or trying to rush you into making a decision, take a step back. A legitimate lender will give you time to review all the details.

4. Don’t Sign Anything You Don’t Understand

Legal documents can be confusing, and scammers bank on that. If you’re unsure about the terms, consult with a trusted attorney, financial advisor, or family member before signing anything.

5. Watch Out for Unsolicited Offers

If someone out of the blue contacts you about a reverse mortgage opportunity, be cautious. Scammers often cold-call, send emails, or even show up at your doorstep with fraudulent offers.

6. Protect Your Personal Information

Never give out sensitive information—like your Social Security number or banking details—unless you are certain you’re dealing with a legitimate lender. Identity thieves often use fake reverse mortgage offers as a way to steal personal information.

What to Do If You Suspect a Scam

Even with the best precautions, some scams can be incredibly convincing. If you suspect that you or someone you know has fallen victim to a reverse mortgage scam, here’s what to do:

1. Report the Scam – Contact the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) to file a complaint.
2. Reach Out to HUD – The Department of Housing and Urban Development (HUD) oversees reverse mortgages and can help investigate fraudulent activities.
3. Consult an Attorney – If you’ve already signed paperwork and suspect foul play, a lawyer specializing in elder law or real estate can help you navigate the situation.
4. Notify Your Lender – If fraud is involved, your legitimate lender may be able to intervene and protect your interests.
5. Warn Others – Share your experience with friends, family, and social groups to prevent others from falling into the same trap.

Final Thoughts

Reverse mortgages can be a valuable financial tool when used correctly, but they also come with risks—especially when scammers are involved. By staying informed and knowing the warning signs, you can protect yourself and your loved ones from falling victim to fraud.

Always take your time, ask plenty of questions, and never feel pressured to make a decision. When it comes to your home and financial security, it's better to be overly cautious than to fall into a trap you never saw coming.

If you or someone you know is considering a reverse mortgage, make sure to consult with a trusted professional. A little due diligence now can save a whole lot of headache later.

Stay safe, stay informed, and keep your hard-earned home equity out of the hands of scammers!