FTC Alert: Identifying False and Misleading Claims Related to Reverse Mortgages

image 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.

  1. 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.
  2. 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.
  3. 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.
  4. 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.

Housing Counselors: How to Help People Avoid Reverse Mortgage Missteps

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  • Aside from lenders not using literature, and not paying or authorizing deceptive ads, a seal of approval from the NRMLA, prominently displayed on literature, would offer a buyer a lot of confidence in the product. (Unless, there already is one. If so, I apologize.) This would, usually, be coupled with publicity touting the organization to the public and the troops.

  • >>a seal of approval from the NRMLA, prominently displayed on literature, would offer a buyer a lot of confidence in the product

    That would work if homeowners knew who NRMLA was. During the past 5 years I’ve explained how Reverse Mortgages work to over 10,000 homeowners and only 1 asked if I was a member of NRMLA, and she was a Mortgage Broker.

    I appreciate NRMLA for the things they do for our industry; but they’re the “best known secret” amongst homeowners. They’ve got to do a better job at branding themselves.

  • BTW: If enough people complain to a TV station about a misleading ad, they might pull it.

    I kept seeing a deceptive ad on CNBC that was made to look like a news report. It was about loan help, or mortgages, or something. Point was, it was deceptive. I emailed them and I never saw it again.(Of course it is still on other stations.) When there is no other noise (complaints) all they (some TV stations) can hear is the cash register ringing.

  • The statement that NRMLA does not do anything about non-member companies is incorrect. Although we do not have the ability to utilize the same sanctions as we do with our members, we can (and do) alert state and/or federal authorities to business practices that we believe to be in violation of rules and laws. We have a very specific process that we pursue to gather facts on a complaint, give the alleged violator a chance to respond, and develop the case fully before we act. If there is no response or an inadequate response from a violator we then act. For members, we have the ability to place them on probation, suspend or terminate membership. For both members and non-members, we can report to authorities, and/or name offendors publicly (but only after due process), so that other industry participants are forewarned, should they be dealing with such parties.

  • I find it ironic as I read this article about false and misleading practices that the Reverse Fiancial advertisement is flashing about their Pathway product and their Jumbo. Do these products really exist? Or are they marketing products designed to attract senior? I wonder?

  • What kind of process does NRMLA have to go through to remove false advertising from a paper? If the advertising is false, do you simply tell both the newspaper and the advertiser that the statements made in print are false? Isn’t that what the cynic did?

    So who was responsible for the removal of the advertising the cynic wrote about? Aren’t we all responsible for speaking up to both educate and self-police our industry?

    I realize NRMLA is neither omnicient not omnipresent and therefore cannot catch all false and misleading advertising done in the reverse mortgage industry either through ignorance or deliberate deception. I for one applaud the cynic for speaking up to the newspaper to remove at least one false ad. Of course,for every one squashed many others pop up. Oh well, we can but try. . . .

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