New CFPB Office of Older Americans Director Looks to Protect Seniors’ Homes

The Consumer Financial Protection Bureau today announced that Hubert “Skip” Humphrey will lead its new Office of Older Americans. Humphrey has served on AARP’s national board and has also worked on behalf of seniors as president of the Minnesota AARP and as a former Attorney General.

“We will remind seniors about protecting their homes,” Humphrey said in a press call Wednesday. He noted that seniors’ home equity totals more than $3 trillion by some estimates, and that the bureau will work to make sure that seniors do not sign up for products or services that are not appropriate for them or that they do not fully understand.

Additionally, Humphrey said that the office will work with other regulators to make sure seniors are not misled by advisors who say they are specialized in working with seniors.

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With regard to a study that the CFPB will conduct on reverse mortgages over the next year mandated under Dodd-Frank, he said the research itself will be important.

“The key goal is that as research takes place, those who are conducting research are senstiive to the needs of older americans,” he said.

The office also noted that many of the 50 million Americans in the 62+ age bracket are ill-prepared for retirement years, and stressed the work the CFPB will do to help that population. Among its efforts, the agency will gather research and information about trends and bad practices to help policymakers and the financial services industry address seniors’ needs, and will protect against false and deceptive designations of financial counselors to make sure seniors have access to qualified financial advice, Humphrey wrote in a statement.

“As baby boomers join the ranks of the retired, their hard-earned savings should help them realize opportunities, not serve as the target of deception and fraud,” said Raj Date, special advisor to the Secretary of the Treasury on the CFPB.

Written by Elizabeth Ecker

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  • It would be a valuable service to the industry for John Yedinak to conduct interviews over the next few months with Raj Date, Richard Cordray, and Skip Humphrey to gain an understanding of how they view HECMs and our industry.  It would also be good if we knew who was doing the research and the methodology which was being employed as well as knowing if anyone within the research group had a background in reverse mortgage lending.
     
    While supporting the statement of the Mr. Humphrey, its legitimacy seems in doubt.  This bureau is taking its self-proclaimed independence from Congressional oversight to an extreme in creating its own mandates.  It would be wiser if they spoke out a little less emphatically.  Strong statements of this nature have a way of biting the proclaimer in the rear at some time in the future.

  • I hope that Mr. Humphrey takes a balanced, unbiased, and intelligent approach in his research and conclusions.  I’ve always believed that a comprehensive approach to financial advice for seniors (or anyone) is the best approach, and someone with a complete tool box is best equipped to provide the best solution.  Prohibiting financial planners from receiving compensation for RM’s, or RM originators from receiving compensation for financial planning, is a barrier to providing the best solutions because they will naturally steer the client to the solution that compensates them.     

    • Lance,

      Fundamentally, there should be a form of financial planning that is distinct from all other services provided in the marketplace.  While it is not as important as distinguishing MDs from medical services providers, CPAs (like you) from other accountants and auditors, attorneys from other paralegal service providers, or architects from designers and contractors, individual financial planning should have a separate licensing requirement which may or may not incorporate CFPs.  Services under this licensing category should be fee based only.
       
      When commission based salespeople provide financial plans it is nothing more than biased product planning.  It is amazing how many of those who sell to individuals profess to provide “independent” planning.  They seem to believe that “independence of mind” – whatever that means – is sufficient.  There is nothing wrong with a salesperson providing a plan to show how their customer may benefit; it is right, logical, and reasonable but that is not financial planning.  BUT that is just one piece of financial planning.
       
      Just before 2007 an individual with a retirement planning credential and insurance license was “teamed” with a reverse mortgage “specialist.”  This husband and wife team would go into poorer communities and provide HECMs with immediate annuities.  It seemed every senior needed this “plan” and somehow, in someway, it always made economic sense (in their minds).  They provided each of their “clients” with a free “financial plan” as part of their sales pitch – oops, financial plan — for which there was no charge.
       
      So I have no problem separating real financial planning from commissions or originating fees; I hope the CFPB focuses on this area especially when it comes to seniors.

      I believe we both are saying the same thing but with far different objectives in mind.  If the separation advocated above occurs, then insurance and securities licenses should be permitted to provide RMs to the extent it does not violate insurance or securities laws; however, that may prove very tricky here in California after December.  

      • We generally agree on this one Cynic (oops, I mean Critic)!  

        However, my understanding of the typical fee-based financial planning arrangement is that a fee is paid by the owner of the assets based on the $ amount managed by the FP.  If my understanding is correct, I’m not sure where that leaves your suggestion since the FP is not able to earn revenue from the RM (unless RM proceeds are invested, which is not a good idea).  Again, the FP will naturally gravitate clients towards products and services from which he/she can make a living.

        Any thoughts on this topic are appreciated.   

        At the end of the day, it’s impossible to regulate away unethical or dishonest behavior, or to keep people from making poor decisions. Regulating education that promotes an informed choice may be more effective. 

        PS – Was that husband and wife team in southern California by chance?  

      • Lance,

        Like you, I do not see eye-to-eye with The_Cynic.  I have been commenting on RMD long before s/he ever did.

        A CFP is not necessarily a financial advisor.  Financial advisors charge a percentage fee of the assets managed.  A financial planner charges an hourly fee for putting together a plan for a client.  They use a 40 page questionaire and a 5 page investment risk tolerance questionaire.  Then they gather data to verify the infomation and to determine if there is any substantial asset, liability, income, or expense which is missing.  From that they prepare cash statements and budgets. 

        From the data and worksheets they develop a financial plan.  It will generally suggest types of investments, a range of amounts to be invested, estimates of the income and expense the rearrangement of assets and debts will produce.  Normally salespeople who claim to do financial planning have no idea what CFPs actually doe. 

         Then they review the plan with the client and if agree, monitor its implementation.  Finally, they review the plan with client at least once annually.

        Financial planners may do tax planning, estate planning, estate tax planning, trust planning, coordination between attorneys and accountants, and other service providers.  I have read up on it and looked into it but it is five somewhat difficult required upper division finance type courses associated with it.  As a real estate broker, this stuff is not my area of strength. 

        CFPs would be insulted if you said they got a “fee” for managing assets.  It would almost be like saying an MD gets paid from the hospital for changing bed pans, etc.   

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