Fed Proposes New Protections and Disclosures for Reverse Mortgages

The Federal Reserve Board proposed enhanced consumer protections and disclosures for reverse mortgages on Monday.

According to the Fed, the proposal would improve the disclosures consumers receive for reverse mortgages and impose rules to ensure advertisements contain accurate and balanced information.

“Reverse mortgages are complex products available to older consumers, some of whom may be more vulnerable to abusive practices,” the Fed said. “To help consumers understand these complex products, creditors would be required to provide improved disclosures that explain particular features unique to reverse mortgages.”

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Under the proposal, lenders must provide a new two-page disclosure that highlights the basic features and risks of reverse mortgages in simple language.  Shortly after filling out the application, consumers would also receive transaction-specific disclosures that reflect the actual terms of the reverse mortgage being offered in a tabular format.

Additionally, the Fed proposal protects consumers from unsuitable reverse mortgage practices by prohibiting lenders from requiring the purchase of another financial or insurance product as a condition of obtaining the loan.  Consumers are also required to receive reverse mortgage counseling before any nonrefundable fee can be imposed (except a fee for the counseling itself) to “help ensure that consumers understand these complex products before they become obligated on the loan.”

The Fed is seeking public comment for 90 days after publication in the Federal Register.

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  • Great more disclosures to clarify what a reverse mortgage is. Why not redraft all disclosures so that there is less unnecessary and confusing duplication?rnrnI cannot wait to read this new clarifying disclosure. I am sure it will utterly amaze us all.

  • >>Reverse mortgages are complex products rnrnAll subjects I’m not familiar with are complex. Reverse Mortgages were complex when I was first introduced to them, but became easy after I took the time to learn how they work.rnrnMany consumers I’ve worked with were the same. At first they’re confused about how Reverse Mortgages work, but the confusion goes away after they’re educated.rnrnReverse Mortgages are only complex to those who haven’t taken the time to learn how they work – just like all other subjects.

    • rainmand,rnrnI have my doubts. Bragging is easy and costs absolutely nothing. rnrnAll reverse mortgages are complex. That is why we use tables and computers to compute principal limits. Even though some of us can use financial calculators to compute tenure payments and servicing fee set asides, I know of no one who computes principal limits without the help of PLF tables and software. The situation will only intensify after the release of the new PLF tables. But then again there is you.rnrnDo your borrowers actually understand the product when you have educated them? You might be surprised to speak with their servicers or have an actual, independent assessment of the knowledge your borrowers retain a year after your education session. It would be a real education and eye opener.rnrnI am still a student of this product. Most other experienced originators I know feel the same way. We know a lot about the product but we are still certainly learning more.

  • I am sure it will be as clear as the new GFE. Let’s turn 1 simple page of fees into three or four pages with several columns that even most loan officers don’t understand. Hey and let’s have all of the States enact laws that mirror the Feds laws already in place so we can add even more pages to an application. Most lawmakers don’t understand reverse mortgages ( mainly because they haven’t studied them), so they feel they better regulate them even more. More is coming.

  • I’m expecting the reverse mortgage application package to hit 200 pages very soon. What good are more disclosures if they’re hidden in all that paperwork. How about simplifying things so people can understand better?

  • I am at a loss for words (well almost). It seems that I read the same press release on a weekly basis “So and so proposes new disclosures to protect seniors from the complex Reverse Mortgage Program” Film at 11. I really believe that most of the lawmakers are suffering from some disease that makes them all want to repeat themselves over and over, kind of like Groundhog Day. For the Love of Pete, will someone, ANYONE please stop the insanity and move on with doing something PRODUCTIVE like consolidating these disclosures to make them LESS confusing. Or maybe finalizing a couple of the new RM products that have been discussed. How about we get someone on these boards that have actual KNOWLEDGE AND EXPERIENCE with RM’s and working with seniors to get one.

  • >> Bragging is easy and costs absolutely nothing. rnrnAre you implying I’m bragging? If you are, your viewpoint is distorted.rnrn>>All reverse mortgages are complexrnrnNo they’re not – they’re easy.rnrn>>Even though some of us can use financial calculators to compute tenure payments and servicing fee set asides, I know of no one who computes principal limits without the help of PLF tables and software. The situation will only intensify after the release of the new PLF tables.rnrnWhat are you talking about? Why must you distort something as simple as this? I’m talking about how a Reverse Mortgage works, not the algorithm for the Reverse Mortgage computation. Have you seen the algorithm for that computation? It’d take a Rocket Scientist to decipher that. Why in the world would you think I’d say that’s simple?rnrn>>Do your borrowers actually understand the product when you have educated them?rnrnYes.rnrn>>You might be surprised to speak with their servicers or have an actual, independent assessment of the knowledge your borrowers retain a year after your education session. It would be a real education and eye opener.rnrnI didn’t say they’d remember everything a year later – where are you coming from? I don’t remember the new things I learned a year ago, how in the world would they remember? I said they understand how a Reverse Mortgage works after I explain it to them … I didn’t say anthing about how long they’d retain that information.rnrn>>I am still a student of this product. Most other experienced originators I know feel the same way. We know a lot about the product but we are still certainly learning more. rnrnI’m in that same boat, and didn’t say otherwise. What I did say is a Reverse Mortgage isn’t complex once it’s explained properly. You don’t have to know 100% about something in order to understand the fundamentals of how something works. Homeowners aren’t an expert after my explanation, but they have a solid foundation and are comfortable enough to know what questions to ask, the characteristics of a Reverse Mortgage, and long term effects.rnrn>>But then again there is you.rnrnYes, and then again there’s me – somebody that thinks differently then you.

    • rainmand,rnrnYou declare: u201cI’m talking about how a Reverse Mortgage works.u201d You also say: u201cI said they understand how a Reverse Mortgage works after I explain it to them.u201drnrnAs to your first statement, you seem to believe one should be able to read your mind. How do you know what the author intended? Where is the complexity? It is not in how the loan itself works; on that level a HECM is a simple non-recourse mortgage with a few unusual features. rnrnThe complexities of a HECM are in its design and in learning to maximize its benefits and avoid its inherent detriments. So you tell me: Is a HECM complex? The answer is yes. You are simply carving out the portion which is not.rnrnNow as your second statement, where have you ever made that statement in this thread? Please, you never said that. You might have meant to say that but you didnu2019t. The vast majority of us can read.rnrnI do not understand your last sentence; perhaps you meant to write “than” rather than “then.” If that is the case, you are most definitely right.rn

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