AARP Calls for Reverse Mortgage Special Protections

A recent hearing for the Banking, Housing, and Urban Affairs Subcommittee on Financial Institutions and Consumer Protection sparked impassioned conversation between the Office of Older Americans and senior advocacy group AARP, with significant attention paid to reverse mortgages.

The hearing included AARP’s senior attorney Julie Nepveu’s testimony, as well as that of Hubert “Skip” Humphrey, director of the Consumer Financial Protection Bureau’s Office of Older Americans, which promotes “sound financial management and decision-making of seniors with a particular focus on the areas of long-term savings and planning for retirement and long-term care.”

After Humphrey and Nepveu read their testimonies, they fielded questions from the Senate subcommittee, many of which focused on reverse mortgages.

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It’s vital to guard seniors from financial fraud, both stressed, and the AARP attorney specifically cited the need for special protections for seniors in the reverse mortgage arena.

“The reverse mortgage market has long been probelematic for seniors,” she said during the hearing. “It provides an amazingly lucrative field for scammers and for high fees to be sucked away from people’s homes. But,” she acknowledged, “it’s also a source of equity for folks to tap when they are retiring, and that is when they don’t have income but they have their home asset.”

She went on to say that it’s a “very important area that needs to be available for seniors to use,” but, she adds, it needs to have “special protections because of the serious harm that can affect seniors.”

Subcommittee chairman Sherrod Brown (D-Ohio) asked at one point about the implications of alternative, non-bank lenders doing reverse mortgages along with bank lenders, citing high origination fees.

Non-bank lenders aren’t the biggest issue, according to Nepveu, as both charge steep upfront fees.

“The alternative finance markets and the mainstream banks both are in the same boat in that they each can charge high fees for this process,” said Nepveu during the hearing. “They both can cause seniors to lose their homes, they can both make the value of the property that would be available to seniors to tap for their equity, less than they would otherwise have available to them.”

AARP is “very concerned with the reverse mortgage market,” said Nepveu, as Chairman Brown followed up with concerns about education.

“Some of the abuses have been, if not abuses—the lack of financial literacy has played a significant role in making these more attractive to seniors than maybe they are,” Brown said.

Seniors who get a reverse mortgage must undergo counseling, generally by counselors who are approved by the Department of Urban and Housing Development, Nepveu informed him, but according to her, sometimes it’s not sufficient.

“The problem is, sometimes the game changes in the middle,” she said. “They’re told for many years that people will be protected, and at the end of the day, they’re not protected. So, there is more to be done on that score.”

Toward the end of the hearing, subcommittee member Jeff Merkley, a Democratic senator from Oregon, asked about the practice of removing younger spouses from their home’s title in order to increase the payout for the older, reverse mortgage borrowing spouse.

Nepveu brought up both the class action lawsuit that AARP is currently involved in with HUD and also litigation that has since been settled in regards to the non-recourse status of reverse mortgage loans.

AARP filed a lawsuit to get HUD to “reverse course again,” said Nepveu, to require that surviving non-borrowing spouses would not have to pay more than 95% of the value of the home.

“If a spouse was not on a deed,” she argued, “they still would get to stay in the home, and they still would not have to pay back more than that 95%. Because, the lender could pay that 95%, the neighbor could pay the 95%, but the person who’s living in that home for 40 years is being required to pay 150% if that’s what the value of the home was and it has fallen that much, and that’s just not fair. It’s not what the legislation required, either.”

An AARP spokesperson confirmed that Nepveu’s testimony represented the organization’s view on reverse mortgages.

In closing, Humphrey emphasized the importance of seniors getting good financial advice or counseling.

“It’s terribly important in these rather complex situations, particularly as they are aggravated by the current market,” he said. “I am sure that most of your constituents, their primary asset is their home. We’re talking about the absolutely vital interest of the people in this country and of older Americans.”

View the subcommittee hearing here, or read the written testimonies of Humphrey and Nepveu.

Written by Alyssa Gerace

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  • Mr. Humphrey is a fine gentleman. He is sharp and a good representative for the CFPB. What was interesting was Chairman Brown started with reverse mortgages and needed with them.  Mr. Humphrey seems to have little
    experience with them.  His record on tobacco is superior.  His experience in the mortgage industry appears to be nonexistent.

    No one was in the hearing but the two speakers and at first just the Chairman and after a while another Senator.  It was 50 minutes of froth and cotton candy.  It seemed the Senators wanted the speakers to spend time on reverse mortgages which they sort of did but there was little doubt they were also somewhat uncomfortable doing it particularly Mr. Humphrey.

    Mr. Humphrey seems decent, fair, reasonable, rational, and forthright.  Despite his experience inadequacies in the mortgage industry, he did not show a negative bias against the HECM program.

    What bothers me is the deep roots Mr. Humphrey has in the Minnesota chapter of AARP. Its representative is the one who fought so hard to convince Congress to reduce the origination fee to 1% of the principal limit. Although less of an issue now, it could have been a real mess back then.

  • As my 92 year father said…I am retired NOT RETARDED!

    Why is it that congress and other political organizations treat seniors like they are stupid and incompetent? 
    I would like to invite congress, AARP, or any other political organization to come on an reverse mortgage interview and then follow the whole process as the reverse progresses through underwriting , closing , and funding and get to know the seniors and family we do these loans for. Most seniors are completely capable and know they decisions they are making.

  • Fees? We all pay the same fees, bank or non-bank, and the biggest one is mandated by HUD. Did AARP forget to mention that to their questioners? Where is this coming from?
    I don’t begrudge AARP their own point of view, but since they are so eager to make sure we and the counselors are all required to present full and complete information to prospective borrowers, and since they are a most powerful special interest group  I just wish they would share the knowledge and information that’s already out there instead of pointing fingers and pushing buttons.

  • When irritated with the antics of Ken Scholen, an AARP advisor and the author of “Home Made Money,” during the HERA hearings, a mutual friend would calm me down by saying:  “Ken is just doing what senior advocates always do.”
     
    It was not the AARP rep who was so bad about reverse mortgages it was Senator Sherrod Brown (D-OH).  His first remark after opening the hearing was on reverse mortgages as was his closing.   The Senator baited the speakers to speak out on reverse mortgages and in favor of the confirmation of the Obama designee for CFPB Director.  Senator Jeff Merkley (D-OH) was not nearly as bad although he baited.
     
    Those were the only members of Congress in that hearing.  It was as if these two Senators wanted Mr. Humphrey to understand the Democratic position primarily on reverse mortgages but other issues as well.
     
    It was no hearing.  It was “true confession.”  The AARP rep was there to reinforce the not so subtle opinions of the two Senators to Skip Humphrey who is not only a significant player in the CFPB but also on the Board of Directors of AARP.

  • I support AARP’s consumer advocacy, but it’s downright embarrassing when their representatives can’t get their facts straight.  Please, AARP, make sure your people know what they are talking about before you send them to Capitol Hill!!!

  • Where was AARP when so many seniors needing money took a no-income,
    no-credit required Option Arm Loan based on the value of their home?  When did AARP ever toot their horn about these dangerous loans offered to senior homeowners?   

    Many of us in the reverse mortgage industry could not save the senior who took out these loans. Many seniors could not evan afford to pay the lowest of the 4 payment options. The accruing interest pushed the balance owed to a point where evan a Reverse Mortgage could not save them from foreclosure. 

    AARP has a big horn and toots it when it is convenient for them.  With all due respect, it is time AARP and so many others obtained a Horn of Knowledge about the Reverse Mortgage and procedures set in place.  It is way past time for so many to throw out their “Horn of Hearsay!”  

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