Senior citizens in the Austin community are increasingly falling prey to various financial scams, according to the South Austin Coalition Community Council.
“We see senior citizens who are being scammed through utility companies taking advantage of them; people scamming them through home healthcare services, where they come claiming to help seniors clean their homes when actually they’re cleaning them out of [their possessions], said SACCC’s Theresa Welch-Davis, sitting at her desk at SACCC’s Senior Satellite Center at 5071 W. Congress Pkwy.
At least 70 elders were gathered there this particular Wednesday, munching on free snacks and lunches as a lineup of speakers shared tips on how they can avoid becoming victimized by the many scams Welch-Davis outlined.
SACCC holds informational workshops and meetings for the elders the second Wednesday of each month on a variety of topics. Welch-Davis, who oversees much of SACCC’s housing efforts, said she encounters about 10 to 12 elders a year who have been victimized by various types of financial scams. But she emphasized that those figures only scratches the surface in the total number of victims out there for such frauds.
Most elderly victims, she said, are too embarrassed or ashamed to come forward to get help.
One of the most pervasive scams happening in Austin involves scammers going door-to-door to elders’ homes. They look to build a relationship with those who own their homes by convincing them to refinance their properties, or take out reverse mortgages to finance sub-par home repairs.
Reverse mortgages are essentially home loans for senior citizens who have built up substantial equity in their homes. Individuals who are at least 62 years old, and who own homes valued at less than $625,000, may borrow between 51 and 77 percent of the home’s appraised value, with no monthly payments required. Borrowers, however, must still pay property taxes and homeowner’s insurance — facts that often get obscured by the financial companies selling the loans.
“Homeowners think that when they do a reverse mortgage, they are free and clear and own nothing,” Welch-Davis said. “They’re basically putting you back into another 30-year mortgage.”
According to a 2012 report by the Consumer Financial Protection Bureau, reverse mortgages are growing in popularity among borrowers despite their numerous predatory aspects — many people are lured by the prospect of what appears to be free and easy money with no strings attached.
But according to some of the report’s key findings, a “surprisingly large proportion of reverse mortgage borrowers (9.4 percent as of February 2012) are at risk of foreclosure due to nonpayment of taxes and insurance.”
What’s more, the CFPB found that many borrowers may not understand that the spouses of “reverse mortgage borrowers who are not themselves named as co-borrowers are often unaware that they are at risk of losing their homes. If the borrowing spouse dies or needs to move, the non-borrowing spouse must sell the home or otherwise pay off the reverse mortgage at that time.”
Other family members who live in the home may also need to find alternative living arrangements in the event that a borrower dies or needs to move.
Since reverse mortgages are so complex and so little understood, SACCC often simply counsels seniors to avoid them altogether, said Juanita Rutues, the organization’s senior vice president and an Austin resident since 1970. She added that she’s just as wary of other refinancing schemes, such as taking out first, second and third mortgages.
Sometimes, however, seniors may be persuaded or pressured into making those decisions by people who they don’t even know.
“In South Austin, we’ve been noticing people going door-to-door, usually African-American women,” said Arnold Bearden, a volunteer with SACCC. “They stop by with literature and a good presentation to solicit seniors to get their homes repaired. They begin to develop a pattern of relationship-building with the homeowner, asking information that may be really private, but that’s designed to win their confidence.”
Bearden said that the fact that the solicitors are black and women is fundamentally important to the scam, since the elderly are likely to be more suspicious of men or Caucasians coming to their doors.
