CFPB Offers Few Answers on Reverse Mortgage Marketing

Following a consumer advisory and Consumer Financial Protection Bureau (CFPB) study on reverse mortgage advertising last week that described ads as leading to “ambiguity,” “false impressions,” “difficult-to-read fine print,” and “celebrity endorsements that imply reliability and trust,” the reverse mortgage industry is left wondering how it can improve to meet regulatory approval. It appears the CFPB isn’t helping.

The industry’s trade association says it is working toward improvement, and the agency says it is receptive. Yet lenders are still left with questions about how they both market to senior consumers effectively and satisfy the CFPB when it comes to marketing materials.

The study

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The industry, by way of its trade association The National Reverse Mortgage Lenders Association (NRMLA), says it would like—and has made efforts—to work with the CFPB, which launched the study and advisory, toward a dialogue around reverse mortgage issues. Yet the agency, to date, has not been welcoming of such a dialogue, the association reports.

The study at issue spanned 59 homeowners age 62 and older who had heard of reverse mortgages, but who did not have reverse mortgages. The advertisements used were selected from 97 ads collected by the CFPB from print, radio, online and television sources.

During a call with press, industry representatives asked whether the agency would make those ads available to help the industry learn from them. The CFPB said it would not.

“CFPB was asked on the press call if it would make the ads it reviewed available to the industry, so we can analyze and learn from them,” says Peter Bell, president and CEO of NRMLA. “Their response was that they have no plans to do so. CFPB was also asked on that call if they have plans to issue any guidance for lenders. On that, they also said they have no plans, but referred to information that ‘the reverse mortgage industry association has put out,’ referring to a document we’ve used to educate our members on items that are inappropriate in advertising.”

NRMLA has since requested the ads under the Freedom of Information Act (FOIA), which allows members of the public to access information from the federal government.

The NRMLA document used to advise members includes a “dirty dozen” list of unethical advertising practices. A CFPB representative said on the press call that the agency is “aware” of the material.

When asked how the industry can improve its messaging, a CFPB spokesperson told RMD the following:

“In November 2012, the CFPB and FTC issued warning letters to mortgage companies advising them about the potential for false or misleading advertising that may violate federal laws and to review those ads, particularly those targeted to older Americans and military veterans. The warning letters identified characteristics in ads that the Bureau reviewed and that appeared to violate federal laws.”

The warning letters pointed to several findings of the CFPB and advised lenders in advance of formal enforcement actions, of the Bureau’s concerns. However, the CFPB says now three years later, it is still concerned about some reverse mortgage advertising.

“The CFPB remains concerned that the content of some reverse mortgage advertisements continue to confuse homeowners and may lead some homeowners to make a decision about a complicated product without clearly understanding the risks and terms,” the CFPB spokesperson said. “It is also important that mortgage companies do not downplay the terms and risks of reverse mortgages through their advertising and marketing practices. Therefore, we are warning consumers to do their due diligence when considering a reverse mortgage, get all the facts, and not be misled by advertisements before making an important financial decision.”

The past

The industry has also taken past measures toward improving consumer-facing reverse mortgage materials, which were not addressed by the CFPB in its correspondence last week.

“Interestingly, NRMLA provided the Bureau, back in 2012, with a recommended model disclosure that we developed,” Bell says. “If adopted, our disclosure would have addressed most of the items they say are troublesome. To this date, we have not heard a peep back from the Bureau regarding our recommendation.”

The CFPB says it is open to input from stakeholders.

“The CFPB is always receptive to hearing from industry and other stakeholders about how to make markets more accessible and efficient for consumers,” the CFPB spokesperson tells RMD. “We welcome input from financial institutions, trade associations, and others to help us better understand and collaborate on issues related to consumer financial protections.”

The CFPB did not name any lenders directly in its advisory nor in its discussion of the study results. However, there were several references in the materials published by the CFPB that pointed to celebrity endorsements of reverse mortgage products as being problematic.

American Advisors Group, which runs a nationwide advertising campaign featuring former Senator Fred Thompson, says its survey of consumers nets a positive response based on the materials made available by AAG; that the company is in compliance with reverse mortgage marketing rules; and will review the findings to determine whether any changes are needed with respect to its messaging.

“American Advisors Group is committed to doing the right thing for seniors and engages in responsible lending practices,” says Teague McGrath, chief creative officer for the company. “We appreciate and support the efforts made to protect senior consumers and share in the mission of educating potential borrowers—to help them make informed decisions about whether a reverse mortgage is right for them—before they apply for a loan.”

The company further stresses the importance it places on its communications being in compliance with regulatory requirements.

“We place the utmost importance on ensuring AAG promotional communications comply with regulatory requirements, meet our even higher standards of consumer lending ethics and integrity, and reflect customer feedback,” McGrath says. “As such, we will closely review the recently released CFPB study findings to determine if further refinement is needed.”

Making ends meet

Ultimately, the CFPB did not cite any specific issues with regulatory compliance—at least not that it made public. When asked on the call about taking action against lenders who did not comply, the agency’s representatives referenced an enforcement action taken some months ago. They did not point to any new findings of noncompliance.

“CFPB indicated that some of the ads were compliant from a legal and regulatory standpoint, yet they are complaining about them nevertheless,” Bell says. “I’m not sure how to respond to a regulator who acknowledges that you are compliant with the rules, but still believes that you are doing something wrong..”

With respect to the industry’s proposed disclosure submitted in 2012, the CFPB did not respond directly. However, the agency says it will continue to monitor the marketplace.

“Our aim is to ensure that reverse mortgage advertisements do not mislead consumers,” the agency spokesperson says. “Consumers should have timely and accurate information about reverse mortgages so they can understand the terms and risks upfront so they can make sound financial decisions. We will continue to monitor the mortgage marketplace for advertisements that violate federal consumer financial laws and may take appropriate action when we find violations.”

Written by Elizabeth Ecker

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  • The Senator who created the Bureau was known for years in the senior consumer advocate community for her quiet but strong opposition to reverse mortgages generally even though she sees it as a possible loan of last resort. The CFPB style of opposition is in line with the Senator’s. Besides it was never the goal of the Senator in setting up the CFPB to collaborate or cooperate with the reverse mortgage industry.

    Why cooperate with NRMLA when NRMLA cannot effectively control the actions of ALL mortgagees, TPOs, or individual originators? The Bureau sees NRMLA for it is, the front for some lenders but certainly not all of the parties in the industry. Why appear to be the pawn of reverse mortgage lenders when sniping by the CFPB is far more effective and makes the Bureau appear independent of us?

    On the other hand in some ways the CFPB is right in relentlessly attacking our ads. While most celebrity ads have been less than inspiring for trying to get across what HECMs really are, those involving Senator Thompson have been among the best.

    But to hear one-liners like borrowers don’t pay the lender but the lender pays the borrower as if that somehow distinguishes all reverse mortgages from all forward mortgages is not only false and misleading but also deceptive. Or that a reverse mortgage is really nothing more than receiving income from the equity in the home is so much nonsense and subterfuge that the industry on its own should categorize it as unethical advertising.

    Or then there is the old Wells pitch, let the home pay you. How stupid!! These are loans from a bank.

  • What should we expect from an agency with zero accountability?!

    By not providing the so-called evidence of the ads that were found ‘misleading’ or deceptive the CFPB is no better than tabloid journalists. Accusations or ‘concerns’ without the benefit of hard facts to examine. They have done further damage to our industry’s reputation and it is too late….the feathers have already been spread in the wind.

  • While it is great to hear the views of one of the creative leaders in our industry, where is the voice of marketing compliance leadership? Do our compliance officers believe we are marginally compliant in our ads or do we go the extra mile to ensure that we are not only barely legal but that we are complying with its spirit.

    Many in the industry do not want to have our ads go under the microscope but prefer if we were held to an overall standard that includes counseling. Yet it is clear that there is a most teachable moment (it is up in the air as to whom that moment belongs) and unfortunately, our one minute fluff, our ads, is in most cases what fills that moment.

    How can we defend saying that the prospect will not pay the lender but that the house pays them. In a loan, where does the senior receive equity or income? What the senior receives is debt proceeds.

    As to the nonsense indirectly attacking Senator Thompson, the CFPB is a left wing political organization established by a very socially liberal Congress, formed and launched by one of the most outspoken liberal Senators in Congress and run and managed by principally Democrats. The CFPB is certainly not going to go out of its way to find praise for the efforts of a conservative like Senator Thompson.

    The CFPB wants us to think they are an independent apolitical senior advocate group. Remove the first “a” from apolitical and that is the CFPB.

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