Yesterday we discusssed the potential for reverse mortgage fraud through questionable occupancy.  Today, we will discuss a far more serious type of  reverse mortgage fraud– fraud through power of attorney.

The power of attorney is when an individual is legally authorized to act for another individual with trust and confidence.  However, this can pose a problem in the case of reverse mortgages if the homeowner did not want to take out the reverse mortgage or if the money from the reverse mortgage is funneled improperly, amongst other things.

While it is important for both seniors and lenders to be on guard against this type of reverse mortgage fraud, it is particularly easy for lenders to take action.  Lenders should make sure that the person who gave power of attorney really gave it, as it is something that can be forged.  The person who is taking out the reverse mortgage should also still have an understanding of what it is they are doing.  Brokers generally recommend writing letters of explanation containing the reasons behind a power of attorney to help answer any questions that others might have and prevent the process from being held up unnecessarily.  An investigation into the circumstances can often uncover whether the power of attorney is legitimate or fraudulent.

Seniors should do their best to educate themselves and know the facts behind a reverse mortgage. They should make sure that it is clear to whomever holds power of attorney, as well as their broker, whether or not they consent to the reverse mortgage.