CFPB Offers New Reverse Mortgage Borrower Tips

The Consumer Financial Protection Bureau (CFPB) issued an advisory Monday outlining three steps consumers with a reverse mortgage should take in response to complaints lodged by borrowers.

The advisory was issued on the same day that the CFPB released a report highlighting consumers’ top complaints for reverse mortgages.

“We’ve heard many complaints from consumers who have experienced problems with reverse mortgages,” the CFPB says on its website, noting the most common complaint is regarding difficulty with changing the loan terms and problems communicating with reverse mortgage loan officers.

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Additional complaints include those coming from non-borrowing spouses who are facing the loss of their home after the borrowing spouse has died, the CFPB says.

While updates to the Federal Housing Authority’s (FHA) Home Equity Conversion Mortgage (HECM) program allow some non-borrowing spouses to remain in the home after the death of the borrower spouse for HECM loans originated after Aug. 4, 2014, that change is not retroactive, the CFPB notes.

Three steps the CFPB advises consumers with a reverse mortgage to take are: verify who is on the loan; make a plan for the non-borrowing spouse, if the reverse mortgage is only in the name of one spouse; and make a plan for any non-borrower family members living in the home.

Read the advisory here.

Written by Cassandra Dowell

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  • The advisory looks like it was written by industry rookies. Who but rookies would call FHA, the Federal Housing “Authority” in the first reference to FHA as found in the third sentence of the advisory. I guess the authors have so little communication with the Federal Housing ADMINISTRATION that they do not know who insures the HECM program. No real surprise.

    The CFPB claims: “The most common reverse mortgage complaint is about difficulty with changing the loan terms….” And you mean we have no record of the CFPB hunting down and punishing those who change loan terms which are not explicitly stated in the mortgage documents in a manner which is in compliant with federal and state law? Shame on the CFPB!!

    Perhaps if the CFPB had stated that borrowers complain about loan terms which change in compliance with law and the terms of the mortgage documents but borrowers complain they somehow were not prepared for such changes despite the well intended and extensive education efforts of counseling and lenders, the complaint would be even handed. But is the CFPB so unbiased? It seems not.

    Then the CFPB foolishly recommends: “If you took out a reverse mortgage with two borrowers, check with your reverse mortgage servicer to make sure its loan records are accurate.” What good does that do? If reverse mortgage borrowers are worried about this, they should get an official copy of the recorded mortgage documents from the local government office (generally the recorder’s office) showing the borrowers and then check with servicer to determine if the servicer’s record reflect the legal documents. If either is incorrect they should try to get the records corrected and if necessary, engage a competent attorney to get that done. After all what is more important what servicer’s records reflect or the records which have a higher legal value in a court of law, like the mortgage documents recorded in compliance with real property recording law? Yet both sets of records should reflect the same information and be corrected in all material respects if they do not agree as soon as possible.

    The CFPB goes on to say: “If your reverse mortgage is in the name of only one spouse, contact your loan servicer to find out if the non-borrowing spouse may qualify for a repayment deferral.” If the goal of the CFPB is to protect borrowers, why send the borrower to the agent of the lender to make legal determinations. Because of the seriousness of the subject, it would be much better for the non-borrowing to seek such advice from the attorney of the non-borrowing spouse. That attorney should be competent in reverse mortgage matters so that various options can be presented to the non-borrowing spouse and if appropriate, the borrowing spouse.

    As to reverse mortgages, it seems the CFPB is more consumer advocate in name only than in practice and that this advisory was the considerable work of its junior staff.

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