During the Acceptable Advertising – and the Language You Must Avoid session at the National Reverse Mortgage Lenders Association Annual Conference in San Diego, panelists called advertising the biggest issue we have to deal with because it is the most visible and offered some insight into an extremely significant and sensitive issue within the reverse mortgage industry.
As NRMLA President Peter Bell pointed out repeatedly during the conference, Senator Claire McCaskill, the source behind much of today’s troublesome reverse mortgage legislation, found out about the issue after her mother received marketing material from a reverse mortgage company informing her that she was eligible for a new government program—leading McCaskill to investigate further.
While a Government Accountability Office (GAO) report had focused on some terms to avoid in reverse mortgage advertising, the session added some terminology. New phrases to avoid include:
- “Eliminate your current mortgage debt payment” – Mortgage debt is not eliminated by a reverse mortgage, only postponed.
- “Make no payments during your lifetime” – This makes borrowers think that they do not have tax and insurance obligations, which they still must pay during their lifetime.
- “Tax free” – The panel advised against using this phrase, as loan officers are not tax specialists and are not licensed to give tax advice. Furthermore, a reverse mortgage is only tax free at certain points, depending on how the funds are dispersed.
- “Stay in your home as long as you live” – This is only true if the terms of the reverse mortgage are complied with.
- “Your heirs will inherit all remaining equity”
- “The lender cannot take or own your home” – If a borrower defaults on a reverse mortgage, the lender can take the home.
- “NO income or credit requirements to qualify.”
Other HUD hot buttons include the use of logos that do not belong to the lender, especially government logos, the use of the term “government backed program,” and deadlines for responses. The panel added that costs of a reverse mortgage should not be ignored because a reverse mortgage does have significant costs, and the borrower should be aware of that.
Finally, the panel made a point of pointing out that companies are in fact responsible for their ads, and advised lenders to be sure they know what their loan officers are sending out and that it is compliant. Complaint advertising remains one of the largest issues facing the industry, and it is extremely important that the industry stops sending out misleading advertisements. As Bell said to close the session, “This is killing us.”
Write to Reva Minkoff