A new proposal from the Federal Reserve aims to reign in misleading marketing from reverse mortgage lenders after consumer testing found statements used in advertisements could be confusing to consumers.
While not final, the proposed rule establishes guidelines to ensure consumers receive accurate and balanced information in reverse mortgage advertisements.
”Reverse mortgage advertisements generally focus on special features of reverse mortgages, such as the fact that regular payments of principal and interest are not required,” said the Fed. “For this reason, the proposal contains additional advertising requirements specific to reverse mortgages that supplement, rather than replace, the general advertising requirements for open-end or closed-end credit.”
Developed earlier this year through consumer testing by the Fed, the proposal identifies eight different statements that require clarifying information. For example, advertisements that state that a reverse mortgage “requires no payments”, must clearly disclose the fact that borrowers must pay taxes and required insurance. Additionally, advertising that a consumer “cannot lose” or there is “no risk” to a consumer’s home with a reverse mortgage would also need clarification.
Interested parties can comment on the rule, which ends 90 days after publication of the proposal in the Federal Register.