Surviving spouses of reverse mortgage borrowers are offered new protections, but reverse mortgage advertising still needs work, writes Consumer Reports in response to recent program updates from the Department of Housing and Urban Development, as well as findings by the Consumer Financial Protection Bureau.
In covering the policy change via an article in its online publication, Consumer Reports notes the new option lenders can take in assigning previous non-borrowing spouse loans to HUD, and the protection borrowers are afforded.
“Thanks to the new rule, lenders have the option to assign such loans to the Department of Housing and Urban Development after the last surviving borrower dies,” Consumer Reports writes. “The surviving spouse can then stay in the home if he or she makes timely tax and insurance payments; maintains the property according to the HECM contract; and can prove legal marriage to the borrower, primary residency in the home, and the legal right to stay in the home.”
But in the same article, the publication also expresses caution stemming from recent CFPB findings about reverse mortgage advertising, namely that advertising can come across as misleading to prospective borrowers.
Highlighting risks such as costly expenses and the need to keep up on property tax and maintenance, Consumer Reports echoes the CFPB’s concerns.
“… a recent CFPB study found reverse mortgage advertisements underplayed those risks. The bureau, which regulates loans and credit products, found the ads were incomplete, and provided inaccurate descriptions,” the article states.
Consumers Union has recommended that all lenders administer a reverse mortgage worksheet to clients, as is required in California. Among other suggestions, the article advises face-to-face counseling, and talking with a financial advisor or CPA who can discuss additional options.
Written by Elizabeth Ecker