A recent advisory from a federal consumer watchdog agency is shining new light on the growing problem of elder abuse. The Consumer Financial Protection Bureau is urging financial institutions to report situations in which they suspect seniors are being exploited financially.
In the housing sector, elder abuse takes many forms, as do its perpetrators. Sometimes it involves a rogue loan officer or real estate agent who creates false loan documents, persuades an unwitting senior to sign them and then keeps the proceeds for themselves. Or worse, perhaps the scumbag takes ownership of the house and forces the rightful owner to move out.
More often than not, though, the culprit is a family member. According to the MetLife Mature Market Institute, some 60 percent of substantiated financial abuse cases involve an elder’s adult child. Sons are most likely to rip off their parents or grandparents -- even more so than a paramour, bogus contractor, fly-by-night handyman or shady lender or agent.
Whoever is responsible, the CFPB reminded banks to be on the lookout for such instances and report them to them to local adult protective services, law enforcement agencies and other authorities. And with good reason: The agency’s research found that elder financial abuse is “widespread and damaging.”
The CFPB says that between 2013 and 2017, the average loss in these cases among adults age 70 or older was $41,000, with almost 1 in 10 losing more than $100,000.
Most lenders, agents and contractors are lawful. But some aren’t. So if there is an elder in your life who is considering a reverse mortgage or other type of home loan, or is hiring someone to remodel a kitchen, here are a few questions you can ask to make sure they aren’t being exploited:
-- Do they understand what it is they are doing? In situations involving reverse mortgages, in which borrowers remove the equity they have built up in the house, it is mandatory under federal rules that borrowers meet with an independent housing counselor for a full explanation of what is involved.
But no such protections exist for other types of mortgages, or for dealing with contractors. So you should make sure your mom, dad, grandparent, aunt or uncle knows what he or she is getting into before proceeding too far.
Of course, this implies that your senior is willing to discuss his or her financial situation with you. Many keep that information to themselves for fear of losing their independence. But if you can get them to open up, you can discuss the pros and cons of their plans to be sure they have a full understanding.
At the same time, the desire to take out a loan they don’t fully comprehend could be a sign that something else is going on in their lives. Loneliness and isolation raise the risk of elder financial abuse, which covers a lot of territory: theft, misuse of power of attorney, investment fraud, home-repair schemes and identity theft. And a higher rate of dementia makes seniors a tempting target, especially when they own their homes free and clear and have good credit ratings.
-- Who is going to benefit? Find out who the real beneficiary will be and why. If it’s not the senior, your antennae should wiggle.
In one case some years back, a 65-year-old woman was coaxed into taking out a $100,000 lump-sum reverse mortgage by her son, who proceeded to gamble the money away in Las Vegas. The son was charged with criminal elder abuse and spent some time in jail, but the money was never returned to his mother, who is now losing more than $3,000 of her equity every month.
More recently, a Montana woman was convicted of bilking her elderly mother out of $120,000 from the proceeds of a reverse mortgage. The mother suffered from Alzheimer’s, and prosecutors argued she did not have the capacity to appreciate or understand the loan. The daughter used the money to pay off her own credit cards, buy jewelry and stable her horses, among other things.
And a Florida loan officer was convicted for participating in a scheme to persuade seniors to refinance their reverse mortgages. He and his co-conspirators fabricated false loan applications and pocketed the proceeds.
Red flags for this kind of abuse include caregivers who isolate elders from family and friends, newfound anxiety about finances, new “best friends,” missing belongings, or the senior no longer receiving statements or other documents from their banks or investment advisers.
-- Is the senior being coerced? Determine if your senior is being pushed into the loan, and if so, by whom.
One elderly couple turned over the proceeds of their new mortgage to their grandson, who had threatened to commit suicide if they didn’t give him the money. It also appeared that some of the loan documents in this case were forged.
Be particularly aware of in-home helpers, including personal care attendants and meal service providers, who have access to the senior’s financial papers and identifying information. Pay special attention to those hired directly from newspaper ads or referral services, who have likely not been screened or supervised by a government agency.
-- Can the senior’s needs be solved in another way? There are several alternatives to reverse mortgages.
If you suspect your senior is being taken advantage of, contact the Adult Protective Services agency in your state. APS programs are typically housed within local or state departments of social services or aging. Further information can be found on the National Center on Elder Abuse’s website: ncea.acl.gov.