FTC Supports Federal Regulators Proposed Reverse Mortgage Guidelines

The Federal Trade Commission has filed comments in support of the Federal Financial Institutions Examination Council’s (FFIEC) proposed guidelines designed to protect consumers from deceptive claims and to help them make better-informed decisions about whether to obtain a reverse mortgage.

“FTC staff believes that the Proposed Guidance addresses important issues related to reverse mortgages and does so at a critical juncture,” said the agency in its comments. “Reverse mortgage products have become more prevalent in recent years, and during an economic downturn even more elderly consumers may seek to use such products to obtain funds they sorely need.”

At the end of 2009, the FFIEC issued proposed guidance for its members on how to deal with reverse mortgages. FFIEC members include the federal banking agencies – Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of Thrift Supervision, National Credit Union Administration – and the State Liaison Committee, which includes representatives from the Conference of State Bank Supervisors, American Council of State Savings Supervisors, and National Association of State Credit Union Supervisors.

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According to the FTC, it specifically supports the FFIEC’s efforts to advise lenders of the importance of not making deceptive claims for reverse mortgages and to provide them with concrete guidance as to the circumstances under which claims may be deceptive in violation of Section 5 of the FTC Act. The comments also encourage reverse mortgage lenders and brokers under the FTC’s jurisdiction to review and consider the proposed guidance’s advice and examples relating to deceptive claims. The comments further note the value of testing disclosures and other measures in certain circumstances to confirm that they are clear and useful and do not create unintended consequences.

Included in the comments were details about the FTC’s activities related to reverse mortgages. According to the FTC, it has an active law enforcement program to assess and respond to problematic conduct in the reverse mortgage market. In addition to regularly monitoring complaints relating to reverse mortgages in its Consumer Sentinel database, FTC staff organized the Federal-State Reverse Mortgage Law Enforcement Working Group in the fall of 2008.

The purpose of the Working Group is to bring together federal and state law enforcement agencies to discuss issues and developments related to reverse mortgages. In addition, it’s intended to enhance coordination and cooperation among enforcement officials to enable them to respond quickly and effectively to unlawful activity related to reverse mortgages. The group has met and continues to meet on a regular basis said the FTC.

You can read the comments from the FTC here.

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  • >>the biggest concern of FFIEC is not HECMs but proprietary reverse mortgagesrnrnAnd proprietary reverse mortgages don’t even exist anymore. Personally, I try to spend my energy working on stuff that actually exists today. Yes, Jumbo’s will come back one day in the future, but they weren’t that bad when they used to be available because their fundmentals were the same as HECM’s.rnrnBefore all the Jumbo programs went away, I specialized in that market and I learned several things:rnrn1. The consumer is very different. They’re very sensitive to Estate Planning issues and ask questions that are way different then my average HECM consumer. The Jumbo consumer crosses their t’s and dots all the i’s. The research they apply prior to making a final decision is extensive and exhaustive.rnrn2. The counseling session for Jumbo’s is just as comprehensive as counseling for HECM’s.rnrn3. All the proprietary programs mimicked the HECM in most manners, but each program had a special feature that made it stand out and useful for specific purposes (ie: second home, co-ops, etc.)rnrn4. The primary difference between HECM’s and Jumbo’s is the interest rate and loan fees. Jumbo’s had a higher interest rate, to offset the risk of not being insured, and the fees were much lower – with some programs offering no fees.rnrnrn>>u201cFTC staff believes that the Proposed Guidance addresses important issues related to reverse mortgages and does so at a critical juncture,u201d said the agency in its comments. u201cReverse mortgage products have become more prevalent in recent years, and during an economic downturn even more elderly consumers may seek to use such products to obtain funds they sorely need.u201drnrnThat statement makes me think they’re not talking about proprietary programs, because it says Reverse Mortgage products have become more prevalent in recent years, yet all the Jumbo’s have disappeared in recent years.

  • I just reported on the FTC’s comments, I have no idea what you think I am trying to “push”.nnAs far as the cross selling article last week, it’s something that Jeff Lewis said and we covered it.

  • (On Kitty Hawk Day last year, Admin, you wrote about FFIEC.)n nThen as now, the biggest concern of FFIEC is not HECMs but proprietary reverse mortgages. The points are well taken and reflected in enacted and proposed legislation in several states.nnLast week the RMD article on cross-selling stirred up an interesting but somewhat disturbing discussion. In rereading the concerns of the FFIEC, after consumer ignorance about the products, inadequate counseling on proprietary products, and inability to pay real estate and insurance, their number four concern is cross-selling.nnThose advocating the right to cross-sell do not seem to get it. Cross-selling is the biggest vulnerability we have as originators but many of those who are licensed to sell such products just don’t seem to get it. It is not just your peers who are expressing concern; it is Congress, regulators, and state legislators but they are not alone.nnFinancial product and insurance licensed HECM originators, it is your peers who are concerned that your loud protests over cross selling prohibitions will stir up more problems for the industry. Please tone it down. Not all of us are crying out for originators to be able to cross sell but there is a significant group of you who seem to show no fear of incurring the wrath of lawmakers or regulators in pushing their agenda. nnPlease just learn to make a choice. Either provide a senior with a HECM or sell your wares; just don’t push or try to do both.

  • >>the biggest concern of FFIEC is not HECMs but proprietary reverse mortgagesrnrnAnd proprietary reverse mortgages don’t even exist anymore. Personally, I try to spend my energy working on stuff that actually exists today. Yes, Jumbo’s will come back one day in the future, but they weren’t that bad when they used to be available because their fundmentals were the same as HECM’s.rnrnBefore all the Jumbo programs went away, I specialized in that market and I learned several things:rnrn1. The consumer is very different. They’re very sensitive to Estate Planning issues and ask questions that are way different then my average HECM consumer. The Jumbo consumer crosses their t’s and dots all the i’s. The research they apply prior to making a final decision is extensive and exhaustive.rnrn2. The counseling session for Jumbo’s is just as comprehensive as counseling for HECM’s.rnrn3. All the proprietary programs mimicked the HECM in most manners, but each program had a special feature that made it stand out and useful for specific purposes (ie: second home, co-ops, etc.)rnrn4. The primary difference between HECM’s and Jumbo’s is the interest rate and loan fees. Jumbo’s had a higher interest rate, to offset the risk of not being insured, and the fees were much lower – with some programs offering no fees.rnrnrn>>u201cFTC staff believes that the Proposed Guidance addresses important issues related to reverse mortgages and does so at a critical juncture,u201d said the agency in its comments. u201cReverse mortgage products have become more prevalent in recent years, and during an economic downturn even more elderly consumers may seek to use such products to obtain funds they sorely need.u201drnrnThat statement makes me think they’re not talking about proprietary programs, because it says Reverse Mortgage products have become more prevalent in recent years, yet all the Jumbo’s have disappeared in recent years.

  • I just reported on the FTC’s comments, I have no idea what you think I am trying to “push”.nnAs far as the cross selling article last week, it’s something that Jeff Lewis said and we covered it.

  • (On Kitty Hawk Day last year, Admin, you wrote about FFIEC.)n nThen as now, the biggest concern of FFIEC is not HECMs but proprietary reverse mortgages. The points are well taken and reflected in enacted and proposed legislation in several states.nnLast week the RMD article on cross-selling stirred up an interesting but somewhat disturbing discussion. In rereading the concerns of the FFIEC, after consumer ignorance about the products, inadequate counseling on proprietary products, and inability to pay real estate and insurance, their number four concern is cross-selling.nnThose advocating the right to cross-sell do not seem to get it. Cross-selling is the biggest vulnerability we have as originators but many of those who are licensed to sell such products just don’t seem to get it. It is not just your peers who are expressing concern; it is Congress, regulators, and state legislators but they are not alone.nnFinancial product and insurance licensed HECM originators, it is your peers who are concerned that your loud protests over cross selling prohibitions will stir up more problems for the industry. Please tone it down. Not all of us are crying out for originators to be able to cross sell but there is a significant group of you who seem to show no fear of incurring the wrath of lawmakers or regulators in pushing their agenda. nnPlease just learn to make a choice. Either provide a senior with a HECM or sell your wares; just don’t push or try to do both.

  • On Kitty Hawk Day last year, Admin, you wrote about FFIEC. Then as now, the biggest concern is not HECMs but proprietary reverse mortgages. The points are well taken and reflected in enacted and proposed legislation in several states.

    Last week the RMD article on cross-selling stirred up an interesting but somewhat disturbing discussion. In rereading the concerns of the FFIEC, after consumer ignorance about the products, inadequate counseling on proprietary products, and inability to pay real estate and insurance, their number four concern is cross-selling.

    We do not seem to get it. Cross-selling is the biggest vulnerability we have as originators but many of those who are licensed to sell such products just don't seem to get it. It is not just your peers who are expressing concern; it is Congress, regulators, and state legislators but they are not alone.

    Financial product and insurance licensed HECM originators, it is your peers who are concerned that your loud protests over cross selling prohibitions will stir up more problems for the industry. Please tone it down. Not all of us are crying out for originators to be able to cross sell but there is a significant group of you who seem to show no fear of incurring the wrath of lawmakers or regulators in pushing their agenda.

    Please just learn to make a choice. Either provide a senior with a HECM or sell your wares; just don't push or try to do both.

    • I just reported on the FTC's comments, I have no idea what I am trying to “push”.

      As far as the cross selling article last week, it's something that Jeff Lewis said and we covered it.

      • You are right. Nothing but the first sentence was directed to you. I will try to correct when the edit key is restored. Thanks.

  • >>the biggest concern of FFIEC is not HECMs but proprietary reverse mortgages

    And proprietary reverse mortgages don't even exist anymore. Personally, I try to spend my energy working on stuff that actually exists today. Yes, Jumbo's will come back one day in the future, but they weren't that bad when they used to be available because their fundmentals were the same as HECM's.

    Before all the Jumbo programs went away, I specialized in that market and I learned several things:

    1. The consumer is very different. They're very sensitive to Estate Planning issues and ask questions that are way different then my average HECM consumer. The Jumbo consumer crosses their t's and dots all the i's. The research they apply prior to making a final decision is extensive and exhaustive.

    2. The counseling session for Jumbo's is just as comprehensive as counseling for HECM's.

    3. All the proprietary programs mimicked the HECM in most manners, but each program had a special feature that made it stand out and useful for specific purposes (ie: second home, co-ops, etc.)

    4. The primary difference between HECM's and Jumbo's is the interest rate and loan fees. Jumbo's had a higher interest rate, to offset the risk of not being insured, and the fees were much lower – with some programs offering no fees.

    >>“FTC staff believes that the Proposed Guidance addresses important issues related to reverse mortgages and does so at a critical juncture,” said the agency in its comments. “Reverse mortgage products have become more prevalent in recent years, and during an economic downturn even more elderly consumers may seek to use such products to obtain funds they sorely need.”

    That statement makes me think they're not talking about proprietary programs, because it says Reverse Mortgage products have become more prevalent in recent years, yet all the Jumbo's have disappeared in recent years.

  • >>the biggest concern of FFIEC is not HECMs but proprietary reverse mortgagesrnrnAnd proprietary reverse mortgages don’t even exist anymore. Personally, I try to spend my energy working on stuff that actually exists today. Yes, Jumbo’s will come back one day in the future, but they weren’t that bad when they used to be available because their fundmentals were the same as HECM’s.rnrnBefore all the Jumbo programs went away, I specialized in that market and I learned several things:rnrn1. The consumer is very different. They’re very sensitive to Estate Planning issues and ask questions that are way different then my average HECM consumer. The Jumbo consumer crosses their t’s and dots all the i’s. The research they apply prior to making a final decision is extensive and exhaustive.rnrn2. The counseling session for Jumbo’s is just as comprehensive as counseling for HECM’s.rnrn3. All the proprietary programs mimicked the HECM in most manners, but each program had a special feature that made it stand out and useful for specific purposes (ie: second home, co-ops, etc.)rnrn4. The primary difference between HECM’s and Jumbo’s is the interest rate and loan fees. Jumbo’s had a higher interest rate, to offset the risk of not being insured, and the fees were much lower – with some programs offering no fees.rnrnrn>>u201cFTC staff believes that the Proposed Guidance addresses important issues related to reverse mortgages and does so at a critical juncture,u201d said the agency in its comments. u201cReverse mortgage products have become more prevalent in recent years, and during an economic downturn even more elderly consumers may seek to use such products to obtain funds they sorely need.u201drnrnThat statement makes me think they’re not talking about proprietary programs, because it says Reverse Mortgage products have become more prevalent in recent years, yet all the Jumbo’s have disappeared in recent years.

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