False Advertising of Reverse Mortgages Concerns Authorities

False advertising, while not new, is cropping up often enough in direct mail pieces to prospective reverse mortgage customers that public and private authorities are expressing concern.

Often appearing as if it is coming from an official (i.e. government) source, the appeals offer to help unsuspecting recipients – usually seniors – take the necessary and proper steps to obtain this specialty financial product. “It is a source of concern,” says Peter Bell, president of the National Reverse Mortgage Lenders Association, who notes that the mailings “are not coming from lenders, but lead generation companies that don’t understand the product.”

He adds that the most common mailings “are impersonations of government agencies [which are] not stating that HECM/reverse mortgages are a loan program. There was a wave of them a year ago, when the new loan limit was announced.”  Earlier this year, ABC 7 San Francisco ran a feature on lenders using these types of mailings.


Industry journalist Jerry Demuth has discovered that HUD lumps all mortgage-related complaints together, “so there is no category specifically for reverse mortgages,” he reports exclusively for RMD.

“The FTC may not even have a category this ‘narrow’,” Demuth points out, noting that according to an FTC media person, the agency “can’t reveal anything [re: complaints], even just numbers, let alone anything on types of complaints, because [it says] all information is ‘nonpublic’.” What’s more, he discovered that since October 1, 2007, HUD has sent notices regarding misleading ads to nine lenders, telling them to stop and to change or eliminate the misleading portions of their ads. The occasional repeat offender reportedly has received civil money penalties, Demuth reports.

Neil J. Morse has been a communications professional working in the mortgage finance industry for more than a decade, currently specializing in the reverse mortgage sector. He can be reached at nmorse@morsecommunications.com

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  • I have done business w/ the so called Equity Ninjas and they are stand up guys, Everyone is entitled to a mistake and I know the printer that they used and in my opinion it wasn’t entirely there fault. The brothers that own Twin Capital have done a lot for the Reverse Mortgage industry and there clients. They scored 9’s and 10’s w/ all the clients they did reverse’s for w/ customer service.

    I am not a friend of theres but as I said I own a Reverse Mortgage Company and when I was having troubles they gave me advice that helped my company out w/ no strings attached. One of the owners even offered to come give my sales staff a free seminar about why seniors are not taking the reverse mortgage and we can do to get around that. I declined and he just consulted me one on one. Would any of you do that for me or anyone else?

    My company has jumped up by 35% in the last two months in volume because of the free advice those so called horrible equity ninjas gave me. I think everyone needs to point there finger at people that deserve it and in my opinion and many others those guys dont.

    Rather than trying to find fault w/ them, why doesn’t everyone take a few minutes and consult these guys for advice. They are very free giving w/ there expertise and it worked for me.

    Btw- Has anyone heard anything negative from that company since that piece aired several months ago? I know I haven’t! Michael Finney even said himself that they’re in good standing w/ the BBB and the DRE.

    Again, I am not covering up for them I just feel that there lesson has been learned and the industry needs to learn from these guys expertise and faults and find a new scapegoat!

  • I’m with you Cynic, if you don’t straighten these abusers (not the good marketers, or the reformed ones) you could get the kind of hand cuffs we have in the securities industry. We can’t run any advertisement that is not approved by FINRA.
    We can’t even send a letter, or an email to a client or prospect that is not approved by our compliance departments (and they are running scared). Forget about a free wheeling “free lunch” or a radio interview, without tough strictures.
    “Oh that can’t happen to us”, I hear (via secret electronic waves)you are saying; but, for example, as we speak, a product called Indexed Annuities might be reclassified as a security. (BTW: I don’t particularly like them.) This COULD happen to RMs, if the populist following politicians ever get the bit between their teeth. Clean up abusive ads before they come back to bite you, say in a nice article in the NY Times or the WSJ and then to all the local outlets. Remember these articles will also be derivatives with only the negative parts quoted. Bamm.

  • For the industry sake, we all must be diligent whenever we decide to use an “outside” lead company, especially one that does mass mailings. Last year, prior to agreeing to buy mail generated leads from an RM lead company, we tried to cover our bases on what was being sent to develop the leads. The letter we agreed was very simple, it included RM basics, and gave borr a postcard return to request additional information. Very, very simple.

    Unfort, the RM lead company mailed something completely different and very deceiving to develop the leads. It took us only 10-20 lead calls before we figured out something was wrong. Eventually one of the Seniors showed us the mailing. It was completely diff to what we agree upon. It started out with.. “United States Federal Law …(such & such)… was created to meet the special needs of Senior Homeowners …” Obviously not what we agreed to purchase. Mainly all we got we very confused Sr’s who thought it included something “different” from the gov’t. After going back to the RM lead company and working our way up the food chain we figured out exactly what type unscroupulous company & people we were dealing with.

    I highly suggest before working with any RM lead company, due your due diligence & research as much as possible. Check with others. Don’t only search under their DBA but also get the pricipal or the “owners” name and any other known DBA’s as well. Had I done a simple “Google” with the proper info we could have saved lots of time and money.

  • I would go so far as to say that, ahem, the NRMLA might, voluntarily, review potential ads from non-members. (That would give me, I know, some measure of reassurance.) Of course this may be an undue burden on NRMLA, so perhaps a small fee might help. The ads submitted should have been contractually guaranteed by the lead purveyors, or payments would be rescinded (get a good lawyer to review your vendor docs).

  • dduck-

    You don’t really think that NRMLA could review every ad put together by every originator or marketing department for every one of our six hundred member companies, plus those they purchase leads from. We’d have to evaluate every ad from every company for compliance with federal laws and regulations, state laws and regulations, and perhaps even municipal laws. That’s what responsible companies have compliance professionals for, or else they utilize outside counsel or consultants who possess the appropriate expertise.

    What we are able to do is put out ethics advisories that guide our members on keeping their ads compliant with our Code of Ethics & Professional Responsibility. Any competent compliance specialist who knows the applicable federal and state laws and regulations, as well as the contents of our Code and advisories, should be able to keep their company doing the right thing.

    We also discuss appropriate advertising (as well as inappropriate) at our various educational events, so representatives from companies who are unsure what’s right and what’s not do have opportunities to find out.

    Finally, we do take action, thru our Ethics Committee, for misleading or inappropriate advertising, by either members and non-members, when reported to us by members, counselors, regulators, consumers or reporters.

    But, reviewing ads, each one individually? It’s an impossibility — unless we were to charge a substantial fee to cover the cost of outsourcing the review to compliance experts or counsel.

  • Mr. Bell

    I stand corrected. From what you say, at this point is does sound like a daunting project. Because I hate the cockroaches that put out deceptive ads, run deceptive seminars and lie to prospects, I tend to wish for eradication methods. These guys drive industries into the arms of overzealous lawmakers and regulators and ruin honest agents/brokers businesses. I just hope you never wind up as a security and have all ads sent from your compliance departments to the regulatory agency for review and, believe me, watering down.

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