Reverse Mortgage Borrower Survey Counters CFPB Findings

As the industry responds to an in-depth research report to Congress conducted by the Consumer Financial Protection Bureau and published in late June, the CFPB’s methodology has been questioned by industry members as well as third parties. While the agency made conclusions having to do with borrowers’ understanding of reverse mortgage products, the CFPB says in its explanation of methodology that it hadn’t spoken with any borrowers in its research process.

Given the lack of borrower input, another study has come to light again, this one commissioned by the National Reverse Mortgage Lenders Association, conducted by Marttila Strategies in 2010.

That study included personal interviews with borrowers, potential borrowers and family members of borrowers and potential borrowers, as well as focus groups. The findings were in stark contrast to the CFPB’s conclusion that reverse mortgage consumers need more information.


“The borrowers were very, very happy with [the reverse mortgage],” Marttila told RMD. “They were not misled. Their kids were supportive, or in some cases, they did not involve their kids. Enthusiasm for the product was unqualified.”

The research process was rigorous, Marttila says, but with the help of a company specialized in focus groups, the entire study was conducted in less than one month, with the focus groups working under a two-week deadline. In contrast, the CFPB conducted a thorough industry review but without the input of people who have taken out reverse mortgages.

“The omission of user satisfaction is a serious shortcoming; our research was rigorous and the results showed remarkably high user satisfaction levels,” Marttila says.

The survey was commissioned by NRMLA, but used an independent list of borrowers without any particular NRMLA affiliation. The findings still represented a departure from the CFPB’s study results.

“It’s very easy for people to criticize without digging in,” Marttila says. “If you’re sitting outside and looking at the alleged myths or [bad] practices you can criticize it. But it’s not right to write this report without talking to people.”

Written by Elizabeth Ecker

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  • We, my wife and I, entered into a reverse mortgage
     because we could “see” what was likely to happen in the housing market.   We did it to protect equity.  Our appraisal was carried out before the “crash” became a reality to many, so it was quite high. We did not need the money, and still don’t.  However our equity amount has been building from the outset, as has the mortgage.  We predict our home will be “under water” for many years, but that makes little difference to us.  When we leave the house, we will send the deed to the reverse mortgage company, take out our equity in a lump sum, and move to assisted living.  The mortgage company will have a very difficult time selling this home to recover our withdrawal of equity in addition to the mortgage.

  • BUT it seems the level of satisfaction eroded from the AARP report to the NRMLA report.  Now that we have a 10% (or higher) default base in the outstanding HECMs, what will the result be?

    Elizabeth states:  “That study included personal interviews with borrowers, potential borrowers and family members of borrowers and potential borrowers, as well as focus groups.”  “That study” refers to the 2010 Marttila Strategies study commissioned by NRMLA.

    But where were the former borrowers in the study?  Only those who have gone full cycle can tell us the full story.  Let those who have experienced the horrors of foreclosure have their day in particular.  Current borrowers may love it but only those who have experienced termination can give a full picture.  The proof is in the taste of eating of the entire pie, not in the cooking of the filling.

    Let the surviving non-borrowing spouse, the senior who had to leave their home for medical reasons and have it sold, and the senior who would have lost their home without a HECMs, downsized, and made a cash fortune as the result, all have their day.  Let the entire population of former borrowers speak or let them speak in proportion to their numbers.  

    • Many seniors are very private about their financial situation. For example, I have received referrals from past clients and one of the first things they tell me is “don’t tell them we have a reverse mortgage” I truly believe that the study that NRMLA did is far more acurate than the CFPB report.

      To my knowledge, I have not had any of my clients foreclosured on for not paying taxes and insurance.  I feel that we in the industry need to educate our borrowers on this.  I do a face to face interview wilh all of my clients.  I bet most of the problems on reverse mortgages come from the loans done on line or over the phione, without personal contact and proper explanation.

      • First, I have no idea which study was the more accurate.  Second, it could be both are as inaccurate as the other and the change in percentages was what was generally true during the time each survey was taken.  Quite frankly attitudes change over time.  Questions can also be worded in such a way that the same person will answer the same basic questions in very different ways in the same week.

        Yes, foreclosures may begin occurring in sizable amounts as defaults for such property charges as property taxes and insurance begin to mature into foreclosures BUT do not be misled into believing the myth that there are no HECM foreclosures outside of defaults for property charges.

        It may be that within a few years, more and more HECM loans will begin terminating each fiscal year as foreclosures than as full payoffs.  Do not believe the myths that FHA insured loans cannot end up in foreclosure when the loan becomes fully due and payable when no borrower occupies the home as the principal residence or upon the death of the last surviving borrower.

        I am working with a non-borrowing widow right now who is the sole heir on a home in another state where within a year of getting the HECM, the value of that home was less than the balance due.  She cannot find a buyer who will buy the home for the balance due.  She may not be able to sell it in a short sale anyway because no homes have sold in her rural area since before her husband got the HECM.  It looks like the lender will have to take the home into its REO inventory through a trustee sale (nonjudicial foreclosure) at the courthouse steps.

        On average right now HECMs terminate within eight years of closing.  Within a year or so we should begin seeing a flood of terminations coming from the endorsements which occurred in our peak endorsement years of 2007, 2008, and 2009.  As we see more and more fixed rate HECMs terminate expect more and more foreclosures whether the termination comes from seniors moving to more appropriate accommodations or due to the death of the last surviving borrower.  Soon a lower but significant percentage of adjustable rate HECMs will also terminate as foreclosures.

        In the real estate business, the cousins of foreclosures and trustee sales are short sales, deeds in lieu of foreclosure, and other similar transfers in title which occur when the balance due on a mortgage is greater than the value of the home or a borrower refuses or is unable to sell the home when the balance becomes due.  The consequences of HECM foreclosures are no different than foreclosures on non-recourse mortgages generally.  Despite FHA insurance, the consequences can be very harsh on both borrowers and their heirs.  It is just like all non-recourse mortgages, the lender (or other note owner) cannot obtain a judicially ruled deficiency judgement but that is about the only significant way it differs from a recourse mortgage foreclosure although some claim the tax rules are very different and at times may be worse.                                                                      

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