Reverse Mortgage Daily wrote a blog post today focusing on the case of a man in Minnesota who pleaded guilty to swindling his mother and was sentenced to the maximum thirty days in jail and five years of probation. Amongst the ways the man swindled his mother was through a reverse mortgage, and the writer wondered if there was a way to protect seniors from such crimes without harming the reverse mortgage industry.
I think the answer is yes.
Every year there are several stories of individuals who have been swindled out of their life savings. We could protect those individuals without harming the reverse mortgage industry by allowing them to buy insurance that would protect their life’s savings if someone has been convicted of defrauding or swindling them, allowing them to replace a portion of the money they have lost and ensuring that they still have money to live on in their old age.
Private companies and/or states could offer insurance against swindling/financial fraud. The insurance could be either mandatory or optional, and could taken out by the policy holder at any point throughout their life. In the same way the FDIC ensures up to $100,000 of each individual’s money in case of a bank failure, the financial fraud insurance would serve to protect an individual’s life savings against instances of swindling, theft, or fraud. While the policy would not necessarily be unlimited, policies of even up to $100,000 could do a lot to ensure that individual’s life savings are protected. Although cases of fraud are not incredibly common, they can be catastrophic to the individuals involved when they do occur. These policies would benefit those involved in something like the Madoff scandal as well.
The only way to collect on the insurance policy would be to show that an individual and/or corporation had been convicted of swindling the policy holder. In this case, the guilty plea from the son would be sufficient to guarantee the mother her pay out. If such insurance existed and the mother was able to collect on it, she would be left with more than the eighty dollars currently remaining in her bank account.
Correction: The man was sentenced to thirty days in jail, not thirty years.