CFPB, FTC Investigation Cracks Down on Reverse Mortgage Advertising

In conjunction with the Federal Trade Commission (FTC), the Consumer Financial Protection Bureau (CFPB) today announced it has issued a series of warning letters to mortgage lenders and specifically, to reverse mortgage lenders it has found in violation of advertising law. 

The agencies have also launched 19 investigations across the two agencies as a result of the findings. 

Following an investigation of 800 randomly selected advertisements, the CFPB and FTC said they found examples of violations among reverse mortgage advertisements. 

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“Some ads for reverse mortgage products claimed that a consumer will have no payments in connection with the product, even though consumers with a reverse mortgage are commonly required to continue to make monthly or other periodic tax or insurance payments, and may risk default if the payments aren’t made,” the CFPB stated. 

Additionally, reps from FTC and CFPB noted examples of ads containing disclaimers that were either too small or deceptive emblems which closely resembled government seals to garner legitimacy. 

The problematic advertisements were found to be in violation of the Mortgage Acts and Practices—Advertising (MAP) Rule, which took effect in August 2011. The rule prohibits misleading claims concerning government affiliation, interest rates, fees, costs, payments associated with the loan and the amount of cash or credit available to the consumer. 

FTC and CFPB have already issued a total of 32 warning letters to infringing companies after reviewing claims across various types of media including internet, newspaper, email and Facebook. Among those under examination by FTC and CFPB are mortgage lenders, brokers, home builders, realtors and lead generators.  

Of the 20 letters issued by FTC and the remaining 12 by CFPB, both parties declined to comment as to what proportion of these claims relate to reverse mortgages. 

“Working together and applying consistent standards to all types of clients in all types of ads is a very important means of making sure that mortgage advertisers are on notice and that they have to comply with the law,” said Assistant Director Thomas Pahl of FTC’s division of financial practices. 

Pahl further stressed the importance of a joint sweep by both FTC and CFPB given the current economic downturn in the mortgage market. As mortgage advertising has gone down as a result of the current economic state, Pahl believes that both advertising and lending will be ramping up in the near future. 

“One of the things we wanted to do through conducting this sweep was to make sure when mortgage advertisers start disseminating claims again, they are aware of their obligation to make sure that none of those ads contain deceptive claims,” said Pahl. 

To further educate consumers about deceptive mortgage practices, CFPB published a blog post indicating what veterans and seniors should look out for when reviewing mortgage ads.  

Written by Jason Oliva

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  • Mortgage advertising on the Social Media is all but out of control.  Social Media gurus are great about advising how to drive traffic, their advice rarely includes warnings about legal compliance.  It is as if Social Media communications were immune from compliance requirements.

    Our industry has some very nice people who bring us a lot of great ideas of how to conduct marketing campaigns on the Internet and Social Media.  Yet rarely do they seem in the least concerned about compliance.  Here is a clear illustration of where good intentions can have unexpected consequences.

    Overseeing all advertising media is one area where the CFPB can bring help to the borrowing public.  Here is an area where strict and unyielding standards should be strongly and harshly enforced.

    Lenders who have failed to bring their originators under control should be punished to the fullest extent of the law as should lenders for not properly monitoring those TPOs which they are supposed to be overseeing.

  • The “no payment” notice is something I have an issue with, are they saying mortgage payments?  No more mortgage payments, you can’t say that?  Someone has an issue with that?  Of course you have to pay property tax and insurance- oh, and guess what you have to pay your water bill, and your electric and if you don’t buy groceries and eat you’ll DIE.  Why are we letting the lowest common denominator dictate how we interact with folks.  I love this business but having to worry and then act that someone over the age of 62 doesn’t wear big boy pants is a bit problematic. 

    • I agree.  The home equity lenders don’t have to include “oh by the way you have to pay your taxes and insurance” in any of their marketing.  Why would anyone assume you don’t need to pay taxes and insurance at any time? 

    • wealthone,

      As I remember reverse mortgage loan documents there is a section on “Due and payable.”  That section makes it absolutely clear there is at least ONE MANDATORY payment.  Yet the borrower can make hundreds of payments if they so see fit.

      So no, not even with a reverse mortgage when only speaking of interest and principal, there is at least ONE legally required payment.

      We all know this.  Why are you so upset about this very transparent issue???  

  • Advertising that presents the Reverse Mortgage as a good thing during retirement years may be deceptive, the government reminds our prospects. Is there any contest now why the industry is in a slump?

  • So…all mortgage advertising should now state that as a homeowner, in addition to making your mortgage payment, if one is required by the mortgage selected, you must also make payments as required for taxes, insurance, utilities and home maintenance. It apparently cannot be assumed that as a homeowner, you would know that you have to pay your taxes. It is not an exclusive covenant of the reverse mortgage that you have to pay your taxes and keep the property insured. That is the case with all mortgages…and in fact it’s true even if you don’t have a mortgage. If the American public is too dense to understand this simple concept, which has existed since the beginning of real estate ownership, we should seriously consider communism…so we won’t have to be responsible for anything. If that doesn’t seem like a good idea, possibly we as a people should tell the government that we find this type of tyranny unacceptable.

  • >>and in fact it’s true even if you don’t have a mortgage.

    Not where I live … homeowners aren’t required to keep the property insured if they don’t have a mortgage.  I thought it was like that across the country.

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