Leaders from the reverse mortgage industry are calling a report published earlier this week by Consumers Union extremely misleading and irresponsible.
Citing abuses previously published by Consumer Reports, the report fails to mention regulations that have been put into place to prevent any more occurrences.
“There is absolutely no new information or any more current allegations than they have put out in the past,” says Peter Bell, President of the National Reverse Mortgage Lenders Association. “They fail to acknowledge and report on the many changes that have taken place in laws, regulations and requirements governing counseling and advertising, or any of the market dynamics that have brought down costs to consumers.”
Published with the California Advocates for Nursing Home Reform and the Council on Aging in Silicon Valley, the group ask regulators to require that lenders ensure reverse mortgages are suitable products for seniors and establish a fiduciary responsibility to customers.
Additionally, they seek to outlaw deceptive marketing and adopt stronger prohibitions on cross selling. Despite a law already in place that bans reverse mortgage lenders from requiring borrowers to purchase a financial product, the group wants to go one step further.
“What the bill left unaddressed is the conduct of the insurance agent or financial planner who sells products or services and convinces the senior to purchase a reverse mortgage in order to finance the transaction,” says the report.
In response to the accusations of cross selling, Jeff Lewis Chairman of Generation Mortgage and leader of the Coalition for Independent Seniors asks where the logic of warning against cross-selling comes from when there is a federal law that prohibits the practice.
Even a report from the Federal Reserve found that after conducting focus groups with reverse mortgage borrowers, “no one indicated that they were encouraged to purchase another financial product, such as an annuity, with proceeds from their reverse mortgage. In fact, one person said that he had to sign a waiver that he would not buy an annuity with the proceeds.”
What upset Lewis most is that the report fails to mention that the industry and regulators have been working to improve the controls in place to make the process better for the consumer. “This is a highly regulated and ethical industry and the report offers zero specific new information about bad acts or actors in the industry,” he says.
Instead of using a reverse mortgage, the report recommends borrowers look for other options like cashing out a certificate deposit or asking family members. Lewis says the group is living in a fantasy world where people have all of these options.
“The reality is that for many seniors, given their lack of adequate liquid retirement savings and the financial stresses faced by their children, the reverse mortgage represents the only means they have for financing their aging in place, which is the best result for the senior, their family and society as a whole,” he says.
More importantly, Lewis says the group feels that seniors can’t make decisions on their own. “This report is an insult to FHA’s competent and careful watch over the industry and an insult to seniors intelligence and implies that seniors are incapable of making good financial decisions. Look at the home equity position of our retirees as opposed to that of the next generation and tell me who’s incapable of making good decisions.”
Later this week, the National Reverse Mortgage Lenders Association is releasing new consumer research that shows a high degree of satisfaction by a significant sampling of current borrowers that will paint a different picture than Consumer Union’s report.
“All in all, the Consumer Union report is a miserable piece of work that is highly misleading and extremely irresponsible,” says Bell. “It’s a shame that so many people will take its content at face value because they are perceived to be a reputable organization. I’m surprised that they would publish something that has so few facts to back up their assertions.”