Three national companies that originate home equity conversion mortgages were penalized on Wednesday by the Consumer Financial Protection Bureau for alleged deceptive advertising practices, according to an announcement from the CFPB.
The CFPB took action against three reverse mortgage lenders, American Advisors Group, Reverse Mortgage Solutions, and Aegean Financial, assessing civil monetary penalties to each one and ordering each one to implement systems to ensure future compliance.
The Bureau said its investigation revealed that all three companies deceived consumers with various reverse mortgage advertisements in the last four years that consumers who took out a reverse mortgage would never lose their home and would be able to stay in that home for the rest of their lives—and that they would be able to pay off all their debts using the mortgage and would not have any monthly payments. In reality, the homes can be foreclosed on if the borrower defaults, and the loan must be paid off if the borrower dies or moves out of the home.
The CFPB claims that the three companies were in violation of the Mortgage Acts and Practices Advertising Rule, which prohibits mortgage advertisers from making misleading claims, and the Dodd-Frank Act which prohibits deceptive advertising of consumer financial products.
“These companies tricked consumers into believing they could not lose their homes with a reverse mortgage,” said CFPB Director Richard Cordray. “All mortgage brokers and lenders need to abide by federal advertising disclosure requirements in promoting their products.”
American Advisors Group was ordered to pay a civil penalty of $400,000; Reverse Mortgage Solutions was ordered to pay $325,000; and for Aegean Financial, the penalty was $65,000, according to the CFPB.
“American Advisors Group (AAG) 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,” an AAG spokesperson said in an email to MReport. “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. As we’ve grown, so have AAG’s ever-evolving marketing and advertising practices.”
“We are pleased to have settled this matter with the CFPB and will continue to focus our efforts on improving our procedures for the future,” a spokesperson for Reverse Mortgage Solutions told MReport.
Aegean Financial did not immediately responded to a request for comment from MReport.
The practices which the CFPB alleged the companies engaged in were described in the results of a study by the Bureau in June 2015 titled “A Closer Look at Reverse Mortgage Advertisements and Consumer Risk” which found, among other conclusions, that some consumers did not understand that a reverse mortgage is a loan that would have to be repaid; some consumers were confused by inaccurate or incomplete information about reverse mortgages in the ads (for example, implying that borrowers could not lose their homes and would not have to make monthly payments); and that consumers could not read “fine print” in the television ads for reverse mortgages, which often covered “insurance requirements, property maintenance and residency requirements, repayment terms, and other important details about the loans.”
“Ads for reverse mortgages are found on television, radio, in print, and on the internet, and many ads feature celebrity spokespeople discussing the benefits of reverse mortgages without mentioning risks,” wrote Nora Dodd Eisenhower, Assistant Director for the Office of Older Americans for the CFPB, in a blog post. “We looked closely at many ads and found incomplete and inaccurate statements used to describe the loans. In addition, most of the important loan requirements were often buried in fine print if they were even mentioned at all. These advertisements may leave older homeowners with the false impression that reverse mortgage loans are a risk-free solution to financial gaps in retirement.”
Click here to view the consent order for American Advisors Group.
Click here to view the consent order for Reverse Mortgage Solutions.
Click here to view the consent order for Aegean Financial.