Reverse Mortgages “Ingenious” with Growth Potential, says CFPB Official

A democratic congressman recently asked the Consumer Financial Protection Bureau (CFPB) its plans for reverse mortgage oversight, especially considering an increasingly aging population, during the House Committee on Financial Services and Subcommittee on Financial Institutions hearing on Nov. 2.

As the battle over the bureau raged on between Democrats and Republicans, Congressman Luis Gutierrez (D-Ill.) referenced reverse mortgages in relation to the Baby Boomer generation, thousands of which are reaching retirement age each day.

“It’s just growing and it’s just going to continue by millions and millions of people,” he said. “Reverse mortgages, are you going to take a look at those?”

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Raj Date, special advisor to the Secretary of the Treasury on the CFPB, replied affirmatively.

“We are. It’s one of these products that on its face is actually an ingenious thing,” he said. “The demographics look quite positive. There might be a real productive use for the product and its growth over time.”

He also mentioned the bureau’s previously stated intention to conduct and publish a study on reverse mortgages, stating its role to protect seniors as a “potentially vulnerable population.”

The congressman seemed concerned about what could happen if consumers don’t fully understand the product, but acknowledged its potential use.

“So, we’ll learn because reverse mortgages sound great,” said Gutierrez. “But if you have to pay the taxes and you got to fix the leaky roof and you don’t understand all the conditions, reverse mortgage could literally put you on the street without a stream of income.”

It’s important to look into the product from two different perspectives, Gutierrez continued, as the CFPB has been charged with protecting senior citizens with a special capacity, and also as part of its plans to regulate the overall mortgage industry in a general capacity.

The CFPB “absolutely” plans to look into reverse mortgages, Date confirmed.

“I’m looking forward to those studies and making sure that the public has a broad understanding of those studies so that they can be better protected,” said Gutierrez, who has previously co-signed a letter to the Department of Housing and Urban Development requesting a modification of the reverse mortgage program regarding the policy for non-borrowing spouses.

The bureau is required by the Dodd-Frank Act to conduct a study within the first year of its launch.

Written by Alyssa Gerace

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  • Like Senator McCaskill, the pontificating of Representative Gutierrez, another Democrat, shows his lack of knowledge of the product.  Does the Representative actually believe there are no consequences to a senior not otherwise paying taxes or insurance?  What would happen if seniors could not pay their full mortgage payment if they had a forward mortgage?
     
    Is the Representative aware of counseling?  Is he aware of the financial risk assessment protocol?  What are his suggestions to make the information more understandable?  Why do Democrats in particular attack the product despite its unique consumer protection, reverse mortgage counseling?  Why are they so vested in the CFPB when it comes to investigating reverse mortgages?  The HUD OIG has shown it is not biased towards HECMs in its rather scathing report about counseling not long ago. But the Representative is but a small piece of the inherent bias among a significant but noisy segment of Democrats in Congress against HECMs. 

    It is what Mr. Date said which is of greater concern.  It is the bureau which he helps oversee that will be giving its assessment of HECMs which is of immediate concern.

    It is bothering to read Mr. Date calling reverse mortgages “ingenious” and then going on to say:  “There might be a real productive use for the product….”  That statement strongly implies that reverse mortgages are not being put to “a real productive use” now.  Using the word “ingenious” implies that Mr. Date thinks the product is clever.

    Is there an inherent bias at the CFPB against reverse mortgages?  Based on the fact that CFPB management was generally selected by Ms. Warren and that her strongest support and her long-term association was with some of our biggest detractors, the statements of Mr. Date are bothering.  While we have read much about the CIS educating Congress, we read nothing of its work with the CFPB.  Of the two, the one of most immediate importance is the CFPB.  The statements of Mr. Date makes one wonder what his understanding of the product is and where it came from.  Who is working with Mr. Humphrey at CFPB?

    No doubt NRMLA is attempting to work with the CFPB.  Mr. Peter Bell has a strong propensity to keep all such discussions secret until he deems it useful to reveal such activities.  If NRMLA is working with Mr. Date, the statements of Mr. Date are even that much more troubling.

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