The Consumer Financial Protection Bureau (CFPB) issued a report detailing reverse mortgage advertisements and their potential risk to older consumers. The CFPB found that, after viewing reverse mortgage advertisements, focus group and interview participants were confused or had misconceptions about important features and terms of reverse mortgage loans.
“Incomplete or inaccurate statements made in advertisements about reverse mortgages can pose serious risks to older Americans,” the CFPB report said. “While advertisements frequently do not describe all the details of the particular product or service being advertised, the incompleteness of reverse mortgage ads raises heightened concerns because reverse mortgages are complex loans used by older, often financially vulnerable homeowners.”
The CFPB interviewed 59 homeowners age 62 and older (48 participated in focus groups, 11 were interviewed one-on-one) and showed them 97 reverse mortgage advertisements (15 direct mail, 30 online, 3 radio, 6 print and 43 television ads).
Based on these focus groups and interviews, the CFPB also found that the participants had misconceptions about important features and terms of reverse mortgage loans and often believed the federal government provided consumer protections for reverse mortgages.
According to its latest Supervisory Highlights (from winter 2015), the CFPB found that, for mortgage originations, some institutions improperly used advertisements with triggering terms without the required additional disclosures.
“Regulation Z requires advertisements to include disclosures when certain triggering terms are advertised. Examiners found in one or more institutions that social media advertising was not subject to monitoring or compliance audit, which are components of an effective compliance management system. Loan originators created their own advertisements and content. Loan originators advertised the length of payment, amount of payments, numbers of payments, and finance charges, without providing the required disclosures, a violation of Regulation Z,” the CFPB stated within the Highlights.
There were no enforcement actions regarding reverse mortgages announced in the Highlights; however, product disclosures have been among the CFPB’s top interests.