Federal Trade Commission to Intensify Scrutiny of Reverse Mortgages

Government continues its march toward greater involvement in private enterprise, including the reverse mortgage sector, with the Federal Trade Commission now expanding its scrutiny there. Senior agency attorney Carole Reynolds tells RMD, “We have new powers [granted] in the current federal omnibus appropriations act, which directs us to begin new mortgage rule making.” And, adds Reynolds, that “heightened scrutiny applies to reverse mortgages as well.”

While conceding that recent complaints to the FTC specifically about reverse mortgages have been few – only 50 out of 4 million general complaints to the agency from 2005 through 2008 – she says: “Now that baby boomers are moving into reverse mortgages, we have it very clearly on our radar screen and we expect to continue monitoring [it].”

One area sure to draw the FTC’s examining gaze is the proliferation of advertising and marketing to potential reverse mortgage recipients. “We’re real focused on misrepresentations about government [affiliations],” Reynolds states, citing as examples: “Copycat names, misleading symbols and claims about no payments when there could be taxes and insurance payments; and if the loan comes due there is a payment [required]. You can’t just say ‘no payments’.” The FTC official also takes to task sham offers of “government benefits,” “staying in your home for life” and “guaranteed to qualify.”


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 can't get an online copy of the following article yet. Will try to do so in the future. It is in the Journal of Financial Services Professionals, July 2009 issue, perhaps you can.
    Author is Clarence C. Rose, PhD: crose@radford.edu
    Title: The Effective Use Of Reverse Mortgages in Retirement

    As I have previously mentioned, some “financial planners” and journalists are generally on your side (RMs) this article and the one is last Sunday's NY Times , are positive journalistic examples, albeit with some caveats that one could quibble with, and in the future possibly correct in a dialog with the authors and FPs.

  • This scrutiny will actually be good for our industry, as long as those doing the scrutiny make the effort to actually learn about and understand Reverse Mortgages before blasting away with ill conceived and politically motivated regulations.

  • “Government continues its march toward greater involvement in private enterprise”
    As far as I concerned this says it all. This country is being “Obamarized” and the free enterprise system as we know it is being destroyed!
    Reverse Guru: Where does the scrutiny by these government agencies end? Can you be so naive as to think regulations won't be politically motivated? They are all drinking from the “Obama Kool-Aid”

  • Good day,

    As far as what the Federal Trade Commission article goes, it is just another form of bashing the Reverse Mortgage industry into the ground. The publicity we have been getting is so unjustifiable. A good share of it are by the people who do not understand what a Reverse Mortgage is all about.

    No one will deny the need for scrutiny and controls over our industry. As one person said, it is needed. My complaint all along has been, why do we have to have so many new agencies such as the Federal Trade Commission, all the various states and you name it getting involved. Why are new regulations and guide lines needed? Why can't HUD enforce the laws, guidelines and regulations governing Reverse Mortgages. If people within HUD are not qualified, then get rid of them and get qualified people to take their place.

    A Reverse Mortgage was always presented as a highly regulated program by HUD. I was always proud to say that, I was proud to be in the Reverse Mortgage industry helping seniors. I am now starting to feel like this evil person lurking in the alley way. This is unfair, I know like many of you reading my comment, that I have done a very good job for my clients. Each person in the Reverse Mortgage Division that I head up for AAXA lives by this code. What about us, what about all the good originators and companies in our industry that puts our seniors before anything else. Why don't we hear about us that are the good guy's. Their are many more of us than the bad guy's.

    I don't see the news media or any of the congressional committees calling on us, the professionals, to present the facts. They don't call on us to present to the legislators and the Federal Trade Commission what is really needed to solve the problems.

    The Reverse Mortgage industry as we once new it is deteriorating. It is deteriorating because to many people and agencies are changing it from what it was. Live pricing by FNMA was a mistake, their were other ways to accomplish solving the market problems. The move by FNMA put the Reverse Mortgage industry close to what the forward industry is. Add that to all the panic by the agencies, the states and those committee chairman that don't know a hill of beans about Reverse Mortgages, you wind up with? One of the best programs that seniors have to help them live a better life during retirement being destroyed!

    I am very saddened by all that I have seen take place, especially over the past year. It is hard enough to do the right thing for our seniors with all the bad publicity against us. It is starting to be very difficult to make a fair income any more. Do they want to drive the good guy's out of the Reverse Mortgage industry and leave it to the bad guy's? I said my piece, I now say, Have a very safe and Happy Fourth of July weekend..

    Best regards,

    John A. Smaldone

  • Obama believes he can run any business better than you can. This man is a Marxist, plain & simple.

    You're not smart enough to make your own financial decisions. You need cradle-to-grave ObamaCare in all facets of your life.

  • Let’s not drive reason from this thread. If we are to play on a level playing field, a referee like the FTC is needed. It was good to see that the FTC has started cleaning its own website. That is a great first step. “Those who live in glass houses should not throw stones.”

    In another article the FTC was promoting the idea of using counselors to monitor advertising. While the idea may seem like a good idea, is it really? Don’t counselors have enough to do already? It seems counselors should not be distracted from doing their principal duty per the recent statements of GAO. Even though some have disagreed with this viewpoint, why should counselors be the point man for bad advertising? If the prospect were in a face-to-face counseling meeting where the advertising was requested in advance, perhaps that idea might work. But with over-the-phone counseling, does anyone really have much confidence in this kind of reporting mechanism? Who will be providing the misleading advertising training for counselors? Then we will need someone to monitor the effectiveness of counselors in this role and on and on it will go.

    I am for at least a modicum of first hand advertising review by the FTC over having counselors assigned this new duty. The FTC reviews do not need to be extensive; they just need to exist. If the FTC were really serious about this matter they would be doing the work first hand not delegating it to those who have absolutely no accountability to them, like counselors.

    While I support FTC oversight on RM advertising, it is hard to support their idea of using counselors.

  • An RM is just a way for money lenders to ripoff home owners. It will never be a good idea to give your house away for half the market price. Only in ameriKa!

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