Reverse mortgage scams target seniors specifically — not because reverse mortgages are bad, but because the borrower is often older, equity-rich, and trusting. The CFPB, AARP, HUD, and the Federal Trade Commission all warn about the same patterns. Here are the seven red flags that mean walk away, and how to protect yourself.
1. Unsolicited contact
Reputable reverse mortgage lenders do not cold-call you. They do not mail glossy postcards promising you've already qualified. They do not send emails offering “guaranteed approval.” If you receive an unsolicited offer for a reverse mortgage, your default response should be skeptical. Real reverse mortgage conversations start because YOU reach out.
2. High-pressure tactics
The reverse mortgage process intentionally takes 30-45 days, and the federal cooling-off period and mandatory HUD counseling exist to give you time to think. Any salesperson pushing you to sign “today” or “before rates change” is violating the spirit of the process. Walk away. The math will not change materially in 48 hours.
3. Upfront fees before counseling
A reverse mortgage lender should never ask you for upfront fees beyond the cost of a required appraisal — and in California, no fees can be assessed until your HUD counseling is complete plus a seven-day cooling-off period. Anyone collecting fees before that is breaking state law.
4. Requests for personal information too early
Asking for your Social Security number, bank account information, or full credit history before you've even decided to apply is a red flag. Legitimate lenders pull credit only with your written authorization, and only after you've started a formal application.
5. Home repair scams using reverse proceeds
One of the most common reverse mortgage scams: a contractor convinces a senior to take a reverse mortgage to pay for “urgent” home repairs that are either unnecessary, overpriced, or never actually performed. If a contractor is the one suggesting a reverse mortgage to you, stop. Get a second opinion from someone with no financial stake in the loan.
6. Family pressure to access the funds
An adult child or caregiver pressuring a parent to take out a reverse mortgage so the family can access the funds is elder financial abuse, even when intentions are mixed. The borrower must be the decision-maker. The proceeds belong to the borrower, not the family.
7. Anyone suggesting you use proceeds for an annuity, insurance product, or investment
Federal law (specifically the HECM provisions of the National Housing Act) prohibits cross-selling reverse mortgage proceeds into annuities or other financial products. If anyone — an insurance agent, a financial advisor, a friend — suggests you use reverse mortgage proceeds to buy an annuity, life insurance, or invest in a security, that is both illegal and a major warning sign.
How to protect yourself
- Verify the lender's NMLS license at nmlsconsumeraccess.org. Look up Lyon House Reverse, Company NMLS #1983478, or Jason Lyon, NMLS #364748 directly.
- Use only HUD-approved counselors. The HUD-required counseling must be with an independent third party from the HUD-approved counselor list. Your lender should not provide their own counselor.
- Bring a trusted family member or attorney to your counseling session and your loan signing. Two sets of eyes catch more.
- Take the full cooling-off period. California law requires 7 days between counseling and application; the federal right of rescission adds 3 more days after signing.
- File complaints with your state attorney general, the California DFPI, and the FTC if you suspect fraud.
What a real lender does
A legitimate reverse mortgage lender will spend 30 minutes telling you whether the product is wrong for your situation. They'll volunteer information about costs and risks before being asked. They'll insist you complete HUD counseling before they collect any application materials. They'll show up to your kitchen table with the same disclosures every other lender uses, because the forms are federally standardized. If your conversation feels like sales, it's the wrong conversation.