AARP is requesting the Federal Reserve withdraw a proposal and defer changes to the Truth In Lending Act (TILA) until next year due to revisions relating to reverse mortgages and the right of rescission.
“Not only would those two provisions greatly undermine existing consumer protections, they break with Congressional intent and exceed the authority given to the Board,” said David Certner, AARP Legislative Policy Director in a comment letter.
Earlier this year, the Fed proposed enhanced consumer protection and disclosure requirements for reverse mortgages that prohibit lenders from requiring the purchase of another financial or insurance product as a condition of obtaining the loan.
“Unfortunately, this prohibition includes a safe harbor provision that deems transactions to be in compliance if the purchase of such financial products occurs at least 10 calendar days after the reverse mortgage transaction has been completed. Allowing for such an exception essentially nullifies this important prohibition,” said Certner.
According to the letter, the safe harbor proposal also appears to be “contrary to the intent of provisions of the Dodd–Frank Wall Street Reform and Consumer Protection Act.” As part of the law, the Consumer Financial Protection Bureau (CFPB) is required to conduct a study of reverse mortgages within one year of being established.
The agency can also issue regulations as necessary for “protecting borrowers with respect to obtaining reverse mortgage loans for the purpose of funding investments, annuities, and other investment products and the suitability of a borrower in obtaining a reverse mortgage for such purpose.”
For these reason, AARP is requesting the Fed to withdraw its proposal and defer discussion of changes to TILA until next year by the new CFPB.