Reverse mortgage scams target older homeowners through fake contractors, stolen loan proceeds, and pressured investment pitches. Here’s how they work, the real warning signs, and how to find a lender who does this the right way.
Find a Reverse Mortgage Lender Near You →Last updated: September 2026
What Reverse Mortgage Scams Look Like
Reverse mortgage scams follow a pattern: someone convinces you to take out a reverse mortgage for a reason that benefits them, not you, then finds a way to take the loan proceeds before you ever see the money. The product itself, a Home Equity Conversion Mortgage (HECM) backed by the Federal Housing Administration, is federally regulated and requires independent counseling before you can apply. The schemes that target it work around those protections, not through them.
For the full picture of how a reverse mortgage works, including the HUD counseling requirement and the protections built into the loan, see our Financial Planning for Retirement guide.
This post covers the five most common reverse mortgage schemes, the red flags that show up before you sign anything, how to protect yourself, and how to tell a legitimate lender from someone trying to take advantage of you.
The 5 Reverse Mortgage Scams to Know
Most reverse mortgage fraud falls into one of five patterns documented by federal regulators.
✓Home repair scams. An unsolicited contractor claims your home urgently needs repairs, provides an inflated estimate, then pushes you into a reverse mortgage to pay for it, according to a HUD Office of Inspector General fraud bulletin1. Some victims are told the repairs are government-funded. The work is often never finished, or never started.
✓Loan proceeds theft. After the reverse mortgage is approved, a fraudster convinces the homeowner to sign over the entire loan payout, sometimes framed as a fee or a deposit, then disappears1.
✓Investment and annuity cross-selling. A loan officer or a third party pitches an annuity or a risky investment using the loan proceeds. This is not a gray area: the Consumer Financial Protection Bureau2 states plainly that reverse mortgage loan officers are not allowed to sell you investments or other financial products.
✓Family, caregiver, and power of attorney abuse. A family member or caregiver coerces or impersonates a senior during the application process, or misuses a power of attorney to redirect loan funds once they’re disbursed2.
✓Foreclosure rescue scams. Someone facing foreclosure, sometimes on a reverse mortgage that’s fallen behind on taxes or insurance, is offered a “rescue” that transfers the deed away from them instead. The Federal Trade Commission warns that any company demanding payment before delivering results, or telling you to stop contacting your lender, is breaking federal law.
Every one of these schemes depends on the same thing: getting you to act before you’ve talked to anyone who isn’t the person asking for your signature.
Red Flags to Watch For Before You Sign
Most reverse mortgage scams show warning signs before any paperwork is signed. Watch for these.
Red Flags
- An unsolicited call, visit, or mailer pushing a reverse mortgage for repairs you didn’t ask about
- Pressure to sign quickly, or told the offer expires soon
- Anyone other than you asking to receive or control the loan proceeds
- A loan officer suggesting you invest the proceeds in an annuity or other product
- Being told you can skip the required HUD counseling session
What a Legitimate Lender Does
- Requires you to complete independent HUD-approved counseling before applying
- Sends loan proceeds directly to you, not a third party
- Never sells investments, annuities, or other financial products alongside the loan
- Gives you time to compare offers from more than one lender
- Answers questions about fees and terms in plain language, in writing
The HUD Office of Inspector General1 specifically recommends reviewing any reverse mortgage paperwork with a trusted person or an attorney before signing, and never meeting a contractor alone.
How to Protect Yourself
These steps work whether you’re considering a reverse mortgage yourself or helping a parent think through one.
- Complete your required counseling session with a HUD-approved counselor before talking to any lender in detail
- Verify a lender’s reputation with the Better Business Bureau, separately from anything the lender tells you
- Get quotes from more than one lender before deciding2
- Keep control of your loan proceeds. No legitimate party needs you to sign them over
- Involve a family member, friend, or attorney in reviewing the paperwork before you sign
- Attend your own closing rather than letting someone else attend on your behalf
Is a Reverse Mortgage Ever Legitimate?
Yes. A federally insured reverse mortgage (a HECM) is a real, regulated financial product that helps many older homeowners access home equity without a monthly mortgage payment. The mandatory HUD counseling session, the non-recourse loan protection, and the safeguards for a non-borrowing spouse are genuine consumer protections built into the product, not marketing language. Our complete guide to how a reverse mortgage works covers exactly how those protections apply and what the loan costs.
A legitimate reverse mortgage can be verified in a few steps before you ever sign anything.
✓Confirm your counseling session is with a counselor from the HUD Housing Counselor Search, not someone the lender referred you to informally
✓Ask the lender directly whether the loan is FHA-insured (a HECM) and get that answer in writing
✓Check that loan proceeds are being paid directly to you, in the disbursement method you chose
✓Compare the offer against at least one other lender before signing
The right question isn’t whether reverse mortgages are risky. It’s whether the specific offer in front of you follows the rules that make the product safe. A HUD-approved counselor and a licensed lender are the two people whose only job is helping you get a straight answer to that question.
Quick Summary: Reverse Mortgage Scams
- The 5 most common schemes: home repair scams, loan proceeds theft, investment cross-selling, family/POA abuse, and foreclosure rescue scams
- A reverse mortgage loan officer is never allowed to sell you an investment or annuity
- Mandatory HUD counseling is a real protection, not a formality to skip
- No legitimate party ever needs you to sign over your loan proceeds
- A federally insured HECM is a real, regulated product when the right steps are followed
Frequently Asked Questions
What does Dave Ramsey say about reverse mortgages?
Dave Ramsey and Ramsey Solutions recommend against reverse mortgages, pointing to compounding interest, closing costs, and the risk of losing the home if property taxes or insurance go unpaid. Those are real costs worth weighing. At the same time, a HECM is a non-recourse, federally insured loan, meaning a borrower or their heirs generally won’t owe more than the home is worth when it’s sold, a protection built into the product itself. Whether the tradeoff makes sense depends on your specific finances and goals, which is exactly what a HUD-approved counselor and a fee-only financial advisor can help you work through.
Is Tom Selleck involved in a reverse mortgage scam?
No. Tom Selleck is a paid spokesperson for American Advisors Group (AAG), a reverse mortgage lender, a role he’s held since 2016. Searches connecting his name to a “scam” are almost always people looking for AAG’s advertisements or asking whether celebrity endorsements make a reverse mortgage more trustworthy. A spokesperson’s endorsement isn’t a substitute for your own HUD counseling session and comparison shopping, regardless of which lender is running the ad.
Sources
Continue Reading
Content on SetToRetire.com is researched and drafted with AI assistance, then reviewed and edited for accuracy by the editorial team at Senior Media Group LLC. It is provided for general informational purposes only and does not constitute medical, legal, or financial advice. Consult a qualified financial or tax professional before making decisions. For more on how we create content, see our Editorial Process.
