The Federal Trade Commission published Housing Counselors: How to Help People Avoid Reverse Mortgage Missteps to provide guidance for counselors in indentifying false and misleading claims related to reverse mortgage offers.
As an example, the FTC said that some unscrupulous lenders may try to mislead seniors about the key features of a reverse mortgage or claim they’re part of the federal government when they’re not, or give the false impression that the reverse mortgage is an entitlement rather than a loan the client must repay.
Below are a few different ways to recognize questionable claims and practices related to reverse mortgages.
- Focus on the key features of the loan, like the interest rate, fees, loan payments, and total cost. If you see a sizable discrepancy between the terms the lender or broker offers and the terms typically offered, consider it a sign of possible deception.
- Look at whether the claims being made are broad and unqualified. Some claims may be false or misleading if a marketer does not clearly and prominently indicate that the claims apply only to certain people or to certain products in limited circumstances. For example, it might be deceptive if a marketer makes claims like “reverse mortgages provide income for life,” “consumers can never lose their homes,” or “borrowers can never outlive their reverse mortgage,” but doesn’t disclose that payments may stop and consumers may lose their homes if they move out of the house or violate another condition of the mortgage, like failing to pay property taxes or insurance.
- Consider the names, seals, logos, and other representations of the lenders and brokers. Some may look and sound like those of government agencies. The m.o. here is to create the impression that the lender or broker is part of — or affiliated with — a government program rather than an organization offering a loan that the client must pay back.
- Ask your clients if they have felt pressured in any way to use a reverse mortgage to buy products or services like long-term care insurance, annuities, investments, home repair, or travel. Some sellers may try to convince a consumer to get a reverse mortgage just to buy the products they’re selling.
The alert also provides ways to alert authorities about possible violations. Check it out at the link below.