CFPB Publishes Reverse Mortgage Guide for Consumers

In conjunction with its 200-plus-page report on the reverse mortgage industry, released last week, the Consumer Financial Protection Bureau has also published a reverse mortgage guide for consumers, now available on its website.

Currently on the bureau’s homepage, consumers are encouraged to find out more about reverse mortgages through the online guide, which can be viewed as a pdf. 

“Considering a reverse mortgage?” the text asks. “A reverse mortgage is a special type of home loan that allows older homeowners to access the equity they have built up in their homes now, and defer payment of the loan until they pass away, sell, or move out of the home.”

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The guide includes basic product information along with questions consumers should consider such as “Are the borrowers the only people who live in the home?” and “Do I plan to remain in my home for a long time?”

It also covers different product options and payment options and reminds potential borrowers that counseling is a required step in the reverse mortgage process. 

The agency’s in depth study last week also prompted consumers and the public to provide additional information about their reverse mortgage experiences. View the request for information

View the consumer guide

Written by Elizabeth Ecker

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  • Here is an interesting paragraph: “wait if you take out a reverse mortgage when you are too young, you may run out of money when you’re older and need it more. The older a borrower is, the more money he or she can borrow.”

    I guess home values and substantial increases in expected interest rates will not matter. Yes, Professor Warren has done it. Her dream organization has brought transparency, clarity, and more truth in lending. (LOL)

    Professor Warren and her minions have also concluded that the research of respected financial planners is false and misleading. The CFPB and NCOA have both concluded that you cannot extend cash flow later into retirement by originating a HECM early in retirement since the only thing they mention is a higher likelihood of running out of money. As to the conclusion of NCOA, see Page 25 of its August 2011 (released in March 2012) joint study with MetLife Mature Market Institute. http://www.metlife.com/assets/cao/mmi/publications/studies/2012/studies/mmi-changing-attitudes-changing-motives.pdf

    None of the referenced documents (including the CFPB guide) encourage Baby Boomers to seek the advice of financial planners as to ways to extend cash flow through originating a HECM much earlier in retirement than previously believed.

    Of course NCOA and MLMMI make their obligatory statement that HECMs are no longer just loans of last resort but give no indication how they are anything else but that.

  • I am reading the CFPB’s consumer guide and I can’t believe that it has a mistake – Under the monthly payout option, it says that the amount you receive grows over time.
    I guess I am not suprised about it’s bias towards keeping people away from the product (e.g. the CAUTION verbage in the first few lines and several “warnings” about running ot of money, with no explanation)
    What about the recomendation that the reader wait, wait for what exactly? What about the risk of waiting and the value of the property falls and the borrower gets less or doesn’t qualify at all?

  • In the section “If you decide on a reverse mortgage – know your payout options”, shouldn’t pay be substituted with accrue in the sentence “with a line of credit, you only pay interest on the money you use”. Same with “if you borrow more than you need, you will pay interest on all of it even if you don’t need it.”

  • I read the CFB’s 4 page consumer guide and I think it’s quite good.  I’ve originated hundreds of RMs over 10 years, and these are points I discuss with my clients.  In particular I agree with their caution regarding lump sum payouts. 

    • Lance,

      I guess you have not talked to MIP in the last ten years?  

      The Guide is obviously focused on HECMs since it is the ONLY reverse mortgage in the last ten years which has had a line of credit which the following is true of:  “The amount of money available to you grows over time.”

      I really, really doubt if you DO NOT say at least something about upfront and ongoing MIP the way the CFPB does in its guide!!!

      For a consumer guide for consumers, it is terribly flawed.   This is the Bureau which wants to oversee our advertising and marketing, really???

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