Upon Reverse Mortgage Industry Study, CFPB Requests More Information

The Consumer Financial Protection Bureau requested information from the public this week on consumer use of reverse mortgages, on the heels of a 200-plus page industry report the agency released Thursday.

Citing consumer confusion among other concerns in the report, the CFPB says that along with the study it conducted as a requirement under Dodd-Frank, it wants to know more still about consumers’ decision making process regarding reverse mortgages.

“To assist its ongoing study of reverse mortgage transactions, the Bureau is seeking detailed information from the public on the factors that influence reverse mortgage consumers’ decision-making, consumers’ use of reverse mortgage loan proceeds, longer-term consumer outcomes of a decision to obtain a reverse mortgage, and differences in market dynamics and business practices among the broker, correspondent, and retail channels for reverse mortgages,” the request for information, published in the Federal Register states.

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The bureau is accepting comments via email and mail with a deadline of 60 days after the publication date, July 2.

The request includes specific questions as guidelines for the information such as “What factors are most important to consumers in choosing among products?” and “What are the typical outcomes for borrowers who still have the loan after 5 years or more?”

View the request for more information.

Written by Elizabeth Ecker

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  • The CFPB should not be relying on the responses of those who have the greatest propensity to respond to questions published by the CFPB. Instead they should be gathering data from direct, positive confirmations with HECM borrowers and former borrowers. Their selection should be statistically and scientifically valid. They should conduct their inquiry using a confidence level of at least 99%. Their sample would not even have to be that large if done properly.

    The CFPB should not exclude those who have been defrauded. It should also do some research into the non-borrowing spouse issue including gathering statistical information from surviving non-borrowing spouses and data from HUD.

    The CFPB should also look at the idea of originators needing specific education or passing the exam portion of the CRMP and the advisability of only NMLS licensees being eligible to originate HECMs. It would be good if the CFPB also investigated cross-selling to determine suitability and related issues. Throwing out the baby with the dirty bath water was a horrible idea and still is.

    The CFPB could make a real difference in evaluating when different segments of the senior population should originate and use the proceeds of a reverse mortgage. However, they must act impartially with an open mind and with the understanding that for many reverse mortgage borrowers, reverse mortgages are the most prudent way to combat the ultimate financial risk of longevity, outliving adequate cash resources. Conventional wisdom about when to originate and use the proceeds of a reverse mortgage may be as helpful to seniors as shutting a home off from fresh air as physicians did in trying to cure the black plague in the dark ages.

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