CFPB Report Gains Attention from Media, Reverse Lenders

The Consumer Financial Protection Bureau (CFPB) nabbed the attention of various media outlets when it issued a report earlier this month highlighting consumers’ top complaints for reverse mortgages. But what got buried in coverage of the report’s findings was that it only reflects a small pool of reverse mortgage borrowers.

AARP News’ blog published an article titled “Surprise! Reverse Mortgages Are Very Confusing,” and other publications ran similar headlines.

But in total, reverse mortgage complaints comprised about 1% of all mortgage complaints, regardless of age, submitted to the CFPB. Frustrations with loan terms, servicer turnarounds and foreclosure problems topped the list of complaints, according to the report titled Snapshot of Reverse Mortgage Complaints December 2011-2014.


The way media covers the reverse mortgage industry can be misleading, reverse mortgage industry members say.

“The reverse mortgage industry is the topic of daily media wars between the informed and the uninformed,” says Mike Gruley, director of reverse mortgage operations at 1st Financial Reverse Mortgages in the Detroit area. 1st Financial Reverse Mortgages is a division of Success Mortgage Partners.

”There is consistent evidence to show that when consumers and their advocates understand exactly how reverse mortgages actually work, they see the virtue of reverse mortgages as a retirement planning tool for certain circumstances,” Gruley says. “The challenge with the perception of reverse mortgages is less about product attributes and performance, and more about misinformation.”

Overall, the reverse mortgage industry has been responsive to consumers’ concerns, reverse mortgage originators say, noting recent changes to non-borrowing spouse guidelines.

“[Advisors are] educating borrowers, as well as their families, on their responsibilities and about fallouts if those obligations are not met,” says Brian Cook, reverse mortgage specialist with Federal Way, Wash.-based Alpine Mortgage Planning, adding that the public perception of reverse mortgage mortgages has gotten “much, much better” over the years. “As more people are being educated about them, more importantly those advising seniors and retirees, they understand how unique a reverse mortgage is to each borrower and the opportunities the loan can provide.”

Reverse mortgage advisors are also diligent about keeping up with the ongoing changes to the reverse mortgage product, Gruley says, noting that some of the same consumer frustrations logged against the reverse mortgage sector are likely seen in more mature and widely accepted industries, such as the investment and computer industries.

“The reverse mortgage industry has been and still is heavily challenged trying to keep up with the often enormous changes, while still continuing to inform consumers about those changes,” he says. “It is sometimes like hitting a moving target, but compared to many more mature industries, I think the industry has done a good job.”

As reverse mortgages continue to evolve to best suit consumers’ and the industry’s needs, the sector will rise to the challenge, experts agree.

“There will always be more work to be done, and the reverse mortgage industry always accepts that challenge,” Gruley says.

Written by Cassandra Dowell

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  • Personally I feel the CFPB could be some of the cause for confusion among borrowers and industry players. The CFPB has been in the background instigating a lot of the changes that have been occurring within HUD. Changes ranging from the NBS issue to the FA ruling as well as others.

    I am not saying that the CFPB has not done some good for the industry but much of what has been and will be changed has changed the entire face of a reverse mortgage.

    The FA ruling primarily came out of the property charge problem as far as delinquencies on taxes, insurance, HOA fees and other related fees. Also the crash of 2008 has a lot to do with what we are experiencing today.

    The way HUD the CFPB and others have gone about protecting the FHA fund over the property charge issue has been a confusing not well thought out plan. There could have been a much simpler way of solving the problem rather than through “Life Expectancy Set Asides” and complicated underwriting changes to the industry.

    I will not go into detail at this time on what other remedies could have solved the problem. I mentioned them plenty of times in the past, which has to do with escrow accounts!

    We in the industry will prevail and the HECM will survive but in the mean time a lot of tax payer money, time and frustration will have been spent and it is not over yet!

    John A. Smaldone

    • John,

      I am lost and confused by your comment.

      Are you really sure that the CFPB has been pushing on the NBS issue? Do you remember that HUD lost in federal appeals court and is NOT going to the Supreme Court? Ask yourself why? It is because they were WRONG in the way that they interpreted the HECM displacement protection provision for SPOUSES in the law. Their latest Mortgagee Letter (15-03) on the subject may also be found to be wrong at least as to those HECMs with case number assigned before August 9, 2013 (or perhaps in its entirety).

      Since when was financial assessment ever proposed to save the HECM program? It was proposed by lenders to save lenders in several ways including their reputations. Perhaps you forget the 2011 explanation by the NYT and Mr. Franklin Codel, the head of Mortgage production at Wells Fargo as to why WF left our little industry. Or perhaps you need to refresh your memory about how MetLife responded to the industry not following it into financial assessment?

      The CFPB has influence but do you have any evidence to back up your specific claims? I see absolutely no evidence whatsoever that any expended influence has had any impact but I am not an insider. Please present your evidence as to how the CFPB influenced Mortgagee Letter 2014-22.

      John, there is far more evidence that LESAs will mitigate payment defaults than escrow accounts. It seems from another comment you made that you believe that your escrow account idea was vetted by HUD and was rejected (as it should have been). If this is a good idea, you should go to a bank and sell it to them. That way the bank could have a profitable voluntary escrow account business like Christmas savings accounts or somewhat like impound accounts for mortgage payments. Looking at how you believe that most borrowers would like escrow accounts, then it would seem a bank in Memphis, Nashville, or Knoxville would love to do this on a national basis; on this point count me very skeptical, certainly not fully pessimistic.

      While I disagree with you, that does not mean, I am rooting for you on the sidelines. I have no stats to prove you wrong just my cynical outlook on the follow through of well intended seniors when it comes to non-mandatory payments.

      Take care.

      • The Cynic, the CFPB is behind and involved in more areas of the financial industry that most people could never imagine.

        Much of what you say holds a lot of water, as far as evidence to what I am claiming, it is available not to be shown.

        The “Financial Regulation Reform Bill”, commonly known as the “Dodd Frank Bill” has literately taken control of our entire financial system. The CFPB was created out of this bill to become one of the most autonomous committees that I have ever seen. They are involved with everything and the reverse mortgage is high on their list.

        As far as my idea of an escrow account set up for reverse mortgage borrowers, yes, I suggested it VIA a US senantor and at that time I was told the servicing headaches would be over whelming. Well my friend, you don’t think all the new regulations, mainly the FA and its LESA is not overwhelming? A lot more overwhelming than any escrow account that a borrower could pay monthly. In fact, I suggested to have a coupon book for our borrower like the old days where they would clip coupons from a coupon book each month and send it in with their payment.

        In short, the cost of doing it that way would have been so much less than what HUD is going through now. The escrow account would have had very little confusion attached to it for everyone! Maybe with the exception of HUD, the CFPB and other politicians involved, why, because it would be to simple!!

        Cynic, that is my reply back to you on this subject. I am not giving you everything you want because I can’t but if you look at the logic behind what I say, it should be very understandable in this day of age.

        Make it a great day and thanks for the come back to me, from you, I respect what you say and the challenge is always fun.

        John A. Smaldone

      • Hey,

        While I strongly support LESAs, they are overkill in their present form. James Veale has a blog where rather than promoting the elimination of financial assessment, he pleads a case for indefinite suspension of financial assessment due to the removal of so many needs based prospects as a result of the changes HUD made on September 30, 2013 and on August 4, 2014. It seems he promotes the idea that HUD should let the dust settle to see if the property charge default issue looms so seriously that financial assessment is still needed.

        I believe that delays are times when concerns should be raised. So nice job.

        Take care and have a great weekend.

  • You mean the following can be said with a straight face? “Overall, the reverse mortgage industry has been responsive to consumers’ concerns, reverse mortgage originators say, noting recent changes to non-borrowing spouse guidelines.”

    While there is nothing wrong with the first part of the sentence, using anything about non-borrowing spouses is not just wrong, it is cruel. Who in the industry stood up or supported the case these brave seniors were making in court? With few exceptions there was an attitude of “how dare these spouses challenge what I told them. I warned them that when their spouses died they would be forced out of the home. Now these freeloaders think they are going to get something for nothing.” Even our business association entered into the courts on the side of HUD but who stood on the side of the law protecting ALL spouses of borrowers, borrower or not.

    Thank goodness AARP put their money where their slogans are. They supported the position of these seniors with experienced and competent litigators. The law was always on the side of these litigants but how can the poor fight a giant like HUD?

    How do we find HUD responding? HUD created Mortgagee Letters which do not follow the law but cut out a policy designed around the litigants who won their case at the Court of Appeals. So we find HUD making the only event which is protected from displacement the death of the borrowing spouse. These Mortgagee Letters do not cover other events causing the HECM to go into the due and payable status like the borrowing spouse being out of the home for more than six months out of any twelve month period or due to medical purposes for more than a year; however, HUD is right not to protect against displacement when all interests in the collateral is transferred to someone other than the current spouse. We also find HUD putting requirements on a protected spouse that the law does not, such as not only must they be the current spouse at the time that the event creating the default occurs (the only legal standard) but they also must have been the spouse at the time of closing and at all times between. We also find that the spouse must have occupied the house as their principal residence throughout the entire period of the HECM; yet not even a borrowing spouse is required to do that as long as at least one borrower occupies the home as their principal residence.

    Finally, the industry did absolutely nothing to create even the very questionable rules we have now. It was HUD and solely HUD. So how did the industry support anything related to the NBS situation other than a general impression of “throw the bums out?”

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