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