HUD Releases Bulletin Warning of Fraudulent Reverse Mortgage Transactions Following Misconduct by Illinois Contractor

In a February bulletin, HUD warned of fraudulent reverse mortgage transactions after an Illinois contractor was found to be convincing elderly homeowners to sign up for repair work (which he sometimes represented to be government funded), when the homeowners were in fact applying for a reverse mortgage.  In other cases, the contractor was found to be advising homeowners that they were applying for a reverse mortgage but persuading them to pay him the proceeds from the mortgage for work that he never performed.

According to the bulletin, the contractor had entered into transactions under false pretenses with over 100 persons on the west side of Chicago.  A federal court recently sentenced the contractor to more than seventeen years in prison and ordered him to pay $2.7 million in restitution.  Although homeowners (especially elderly homeowners) should be cautious of unsolicited contractors approaching them about purportedly necessary repairs, HUD emphasized that concerns about fraudulent transactions should not deter homeowners from using reverse mortgages as an important financial tool.