Reverse Mortgage Fraud Schemes from a 2008 FBI Mortgage Fraud Report:

"Unscrupulous loan officers, mortgage companies, investors, loan counselors, appraisers, builders, developers, and real estate agents are exploiting Home Equity Conversion Mortgages (HECMs) — also known as reverse mortgages — to defraud senior citizens. They recruit seniors through local churches, investment seminars, television, radio, billboard, and mailer advertisements, to commit the fraud primarily through equity theft, foreclosure rescue, and investment schemes."

"Equity theft schemes are the most common method used by mortgage fraud perpetrators to exploit HECMs. Perpetrators, often with the aid of straw buyers, execute a scheme designed to withdraw false equity from properties. They typically identify foreclosed, distressed, or abandoned properties (or buyers) using information contained within county deed records. Perpetrators purchase the properties using straw buyers who commit occupancy fraud by fraudulently stating they will be using them as their primary residence."

"They recruit seniors to "purchase" the properties from the straw buyers. This is generally accomplished by the perpetrator transferring the deed to the property to the senior with no exchange of money."

"After the senior is living in the home for at least 60 days, the perpetrators arrange for the seniors to obtain HECMs, with the aid of a fraudulently inflated appraisal, and encourage the seniors to request a lump sum disbursement of the equity. The perpetrators, often in collusion with the settlement attorney, abscond with all of the equity at closing."

"They facilitate appraisal fraud by arranging for minor cosmetic repairs, or falsely documenting repairs, that were never performed to inflate the appraisal. They also fraudulently create fictitious loans and liens that enable them to distribute the loan proceeds to themselves, the straw buyer, and others at closing. As more members of the “baby boomer” generation turn 65, their vast and expanding real estate holdings make reverse mortgage fraud an increasingly attractive scam for perpetrators."

The entire report can be read at the FBI site.

A Wall Street Journal article, Mortgage Fraud: A Classic Crime's Latest Twists; As 'Reverse' Loans Grow More Popular, Scams Put Older Adults at Risk