A reverse mortgage happens when the homeowner takes out a cash sum against the value of his property. He might be required to pay interest on the loan or not, but the capital sum and interest are repaid to the lender when the homeowner moves out of the property (or dies).
The reverse mortgage scam mainly targets older owners, who have their capital tied up in their property and who are convinced by “specialists” to get some cash out and invest in a bogus opportunity, promising high returns. Or the lenders are simply charging ridiculous interest rates on the mortgage.
The “specialists” who work for the lender often convince the victims that they should get get a reverse mortgage because the “specialists” get big commissions out of it.
How to avoid: if your parents or grandparents are thinking of getting a reverse mortgage, try to convince them otherwise, unless really necessary. The scammers might convince them that it is necessary to get one, but make sure they consult several experts, not one.