Mainstream News Reports: Government Watchdog On Reverse Mortgages

The publication of a 200-plus-page Consumer Financial Protection Bureau report on the reverse mortgage industry has garnered ongoing interest from mainstream media outlets from the Wall Street Journal to the L.A. Times and American Banker, to name a few. 

Mainly pointing to the report’s highlights rather than showcasing the CFPB’s headline, the reports covered the agency’s concerns as well as some recommendations and statements from industry groups and consumer advocates. 

RMD gathered a few headlines spanning financial press and beyond:

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New York Times: Report Highlights a Rise in Reverse Mortgages. The NY Times coverage focuses on the number of reverse mortgages currently being done. “A growing portion of reverse-mortgage consumers are taking the proceeds in a lump sum, rather than in a stream of payments. And they often are using the proceeds to pay off other debt — a troubling trend, the bureau said in the report, which was undertaken as required under the Dodd-Frank regulatory law.”

The Wall Street Journal: Reverse Mortgages Worry Regulator. WSJ focuses its coverage on some concerns noted by the CFPB including deceptive marketing practices, complicated loan terms and misleading marketing materials—as well as the potential for the industry to grow as tens of millions of baby boomers retire. 

Associated Press: Gov’t Watchdog: Reverse Mortgages Confuse Elderly. The government’s consumer finance watchdog says the growing reverse mortgage market is getting confusing, AP writes. That could mean costing seniors extra cash or their homes

Dow JonesConsumer Bureau Issues Warning on Reverse Mortgages. A financial regulatory is warning new rules may be needed to address hidden dangers in reverse mortgages, the special loans that enable cash-strapped seniors to borrow against the equity in their homes, Dow Jones newswires writes. 

American BankerCFPB Finds Larger Loans and Younger Borrowers in Reverse Mortgage Study. The AB coverage cites particular findings of the CFPB, including the high proportion of borrowers who opt for a lump sum payment. 

L.A. Times: Consumer Bureau, Interest Groups Offer Tips on Reverse Mortgages. Taking a more advice-based angle, the L.A. Times coverage focuses on industry groups and consumer protection groups that have offered advice geared toward improvement of the reverse mortgage program. 

Written by Elizabeth Ecker

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  • Some industry leaders not long ago hailed MetLife Mature Market Institute and the National Council on Aging for creating a study which emphasized results from the initial counseling wide use of FIT designed and created by NCOA back some 21 months ago. That study focused and over stressed the results of its initial findings on the age of average counselees, not borrowers.

    While some industry leaders hailed it as an important step forward in furthering our new found positive relationship with financial planners, it had the impact MLMMI and NCOA intended. Senior advocates raged about the implications to younger borrowers warning that younger borrowers were in danger of running out of money too early in retirement if they got HECMs too early in retirement despite recent findings of very esteemed financial planners. Worse several influential financial advisors who did not participate in those studies came out and essentially warned about younger seniors obtaining HECMs. The media was full of such stories.

    Now the over stress on younger counselees (not borrowers) is even impacting the CFPB study.

    The pity about this issue is that it is extremely misleading. When the average age of seniors is dropping so dramatically, the average of age of the youngest HECM borrower (not counselee) is mildly following the trend in this demographic which is only to be expected. The tragedy of this story is by its own admission, NCOA is not prepared to provide the counseling younger seniors need and will need in larger and larger numbers. The FIT program treats all seniors the same and does not take into account or focus in on the expected change in cash flow most younger seniors face. In that regard FIT is a farce making the financial assessment segment next to worthless when evaluating the financial planning being advocated by such financial planners as Mr. Harold Evensky and Drs. Sacks, Sacks, and Salter.

    The praise piled on the MLMMI and NCOA March 2012 study by industry officials has backfired and is now incorporated as a strong negative in the CFPB study as clearly reflected by the publishing and broadcast media. Why the backfire was not obvious is hard to say. Heaping praise on whatever NCOA says or does is not what our industry needs. While we need to cooperate with counseling to improve the HECM program, we do not need to swallow everything which NCOA promotes, like FIT!!!

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