Reverse mortgage firms fined $799,000 over deceptive consumer ads
File photo taken in 2016 shows Richard Cordray, director of the Consumer Financial Protection Bureau, testifying at a U.S. Senate hearing.
Three reverse mortgage companies were collectively fined $790,000 for using deceptive advertising that claimed consumers could not lose their homes, a federal regulator said Wednesday.
The nation's largest reverse mortgage lender, American Advisors Group, Reverse Mortgage Solutions and Aegean Financial reached consent agreements with the Consumer Financial Protection Bureau after the regulator's investigation found they used ads whose scripts featured similarly misleading though reassuring claims:
"Can I lose my home? "No you cannot lose your home."
"I can show you how to use a government-insured program that allows you to save money, get cash and live payment-free as long as you live in your home."
Consumers with reverse mortgages can "live in your home for the rest of your life" "stay in your home forever" and "never ever be forced from your home."
Separately, American Advisors Group touted the financial advantages of reverse mortgages in ads that featured Fred Thompson, a former Law and Order TV drama actor and former U.S. senator who characterized the product as a "safe, effective financial tool."
Reverse mortgages are special home loans that enable homeowners aged 62 or older to draw on the equity they've built up in the dwellings and receive money through lump-sum payments, monthly payments or lines of credit.
However, consumers who get reverse mortgages typically must pay for property taxes, insurance, and maintenance costs. They can default and lose their homes if they fail to comply with the loan terms, the CFPB said.
"These companies tricked consumers into believing the could not lose their homes," CFPB Director Richard Cordray said in a statement issued with the consent orders. "All mortgage brokers and lenders need to abide by federal advertising disclosure requirements in promoting their products."
American Advisors Group, licensed in 49 states and the District of Columbia, said it is "deeply committed to helping older Americans achieve stability in retirement."
"We are dedicated to raising awareness about reverse mortgage loans and educating consumers so they can determine if this is the right solution for their financial situation," AAG CEO Reza Jahangiri said in a formal statement. "We take our regulatory responsibilities seriously and have made a significant investment in our compliance and legal infrastructure to ensure we fully conform to all marketing laws and rules — and better understand how they are interpreted"
Reverse Mortgage Solutions based in Houston and licensed in 48 states, said it was pleased with the settlement and "will continue to focus our efforts on improving our procedures for the future."
Representatives Aegean Financial, licensed in California, Louisiana, Oregon, Texas and Washington, did not immediately respond to messages seeking comment on the investigation findings and consent order.
Along with paying the financial penalties, the companies are required to make clear and prominent disclosures in their reverse mortgage ads and use internal oversight systems to ensure they are obeying all laws.
The findings follow a June 2015 CFPB study that found many consumers were confused about reverse mortgages and warned those who consider the products should determine "how long their loan proceeds will last them given the loan’s interest rate, their living expenses, home equity balance, and age."
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