Wednesday, January 04, 2017

Consumer Feds Squeeze Total Of $800K From Three Lenders Over Alleged Deceptive Practices In Peddling Reverse Mortgages

The New York Times reports:
  • Reverse mortgages, a type of home loan available to older Americans, sometimes are marketed in advertisements featuring reassuring celebrity spokesmen. But federal regulators have reminded lenders their pitches also must clearly disclose the loans’ risks.

    The Consumer Financial Protection Bureau [last] month fined three companies for using deceptive advertisements to sell reverse mortgages. The bureau ordered the companies to stop the misleading ads, which dated to early 2012, and to pay combined penalties totaling nearly $800,000.

    Reverse mortgages, formally known as home equity conversion mortgages, are loans that let borrowers ages 62 or older draw on the equity in their homes. Homeowners can receive funds in a lump sum, in monthly payments or as lines of credit; repayment of the loan is deferred until the borrower dies, moves out or sells the home.

    According to administrative consent orders issued by the bureau, the companies promoted the loans as essentially risk-free. But borrowers of reverse mortgages can, in fact, default on their loans and lose their homes through foreclosure if they fail to make necessary payments for property taxes, insurance or home maintenance or do not meet other requirements.
For more, see Reverse Mortgage Lenders Fined for Ads That ‘Tricked’ Older Borrowers (Three companies fined because their commercials made it seem that the loans are risk-free).