Rising Home Equity Leaves Seniors Ripe for Financial Abuse

For many U.S. seniors, home equity commands the lion’s share of their net worth. But as this valuable stockpile of wealth continues to accumulate with little signs of slowing down anytime soon, so is the risk of seniors falling victim to financial exploitation—and regulators are taking notice.

Financial exploitation—the illegal or improper use of a person’s funds, property or assets—is the most common form of elder abuse and costs seniors billions of dollars per year, according to the Consumer Financial Protection Bureau (CFPB).

Last week, the CFPB issued an advisory and a report with recommendations for banks and credit unions on how they can prevent, recognize and respond to financial exploitation of American seniors.


“When seniors fall prey to a scam by a stranger or to theft by a family member, they may be too embarrassed or too frail to report it,” said CFPB Director Richard Cordray during a press call Wednesday. “Banks and credit unions are uniquely positioned to look out for older Americans and take action to protect them.”

Older people are attractive targets because they may have accumulated assets or equity in their homes and usually have a regular source of income such as Social Security or a pension, the CFPB report states.

In 2011, the net worth of households headed by a consumer age 65 and older was approximately $17.2 trillion, and the median net worth was $170,500, according to the U.S. Census Bureau.

Of this total net worth, more recent data indicates a growing wealth of home equity held by senior homeowners of $5.83 trillion as of the fourth quarter of 2015, according to the Reverse Mortgage Market Index from the National Reverse Mortgage Lenders Association and RiskSpan.

This aggregate value of home equity, which represents a $140.2 billion increase from the prior quarter, is growing at the same time that greater population trends project the number of Americans over age 60 will grow to nearly 62 million by 2024.

“The need is very real,” Cordray said. “Older Americans make attractive targets for financial exploitation because many have accumulated some wealth in the form of retirement savings or home equity. They can be isolated and lonely, and some may have impaired physical or mental capacity that makes them especially vulnerable.”

Diminishing cognitive abilities not only make seniors more susceptible to instances of fraud and abuse, but it also affects their financial decision-making during a time when such decisions are critical to their well-being.

To assist financial institutions with identifying and discussing elder financial abuse with their clients, the CFPB offered several recommendations or banks, credit unions, as well as other organizations who work directly with senior consumers.

Such recommendations include training staff to recognize, prevent, detect and respond to abuse. This includes training that covers the warning signs of financial exploitation and appropriate responses to suspicious events.

The CFPB also suggests organizations adopt fraud detection technologies that can identify suspicious account activity associated with elder fraud risk, including the use of predictive analytics to review account holders’ patterns to determine if unusual activity occurs that is outside of the customer’s regular behavior.

Banks and credit unions should also enhance protections for their senior customers, the CFPB recommends, such as encouraging consumers to plan for incapacity.

“They can also offer age-friendly account features such as opt-in limits on cash withdrawals or geographical transactions, alerts for specific account activity, and offer view-only access for authorized third parties,” the CFPB stated in its advisory. “And they can enable older consumers to provide advance consent to share account information with a trusted relative or friend when the consumer appears to be at risk.”

While the recommendations laid forth by the CFPB are not law-binging regulations, they are simply suggestions to urge institutions to consider in serving their customers, especially older clientele—the majority of whom have checking or savings accounts and rely on tellers as their primary form of banking.

“Financial institutions have a tremendous opportunity to serve older consumers by vigorously protecting them from financial exploitation,” the report states. “The CFPB looks forward to continuing to work with financial institutions and seeing a broad spectrum of financial institutions implement its recommendations so that a greater number of older Americans can enjoy later life economic security.”

Read the CFPB report.

Written by Jason Oliva

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  • Oh look, here comes the CFPB again. You have to wonder what motivates them to protect our seniors from themselves. Gotta make sure they don’t survive.

  • I have published the CFPB “missle” on my webpage with the following notation. I have included a vetting statement for those willing to take me on as a HECM loan officer. Editorial Note: This is published because it will be wise to vet Reverse Mortgage loan officers following this warning from the government who regulates this program — especially those canvasing senior prospects by phone — before buying into this popular retirement plan. This loan officer has been responsible for hundreds of HECM loans in Western Arizona over 13 years and does not mislead or misuse seniors in the process of facilitating one of these loans. Borrowers have not shown to be misled and support their recent decisions publically. I welcome financial planners, friends and relatives to investigate this solution to senior financial success in retirement mode. In addition: “I have one of these loans of my own and married my current bride after writing one for her”. See vetting statement an bio at the end of this post for more information. Warren Strycker, 928 345-1200.

    See for yourself: http://gofinancial.net/2016/03/financial-abuse/

  • Those were great comments by both RMMythis and wstrycer, I got a kick out of both of them.

    However, this is not really a laughing matter, it is great the CFPB is coming out with this but will it really do any good. Also, can we actually expect the CFPB or the Federal Government to closely monitor their own non binding regulations or advice??

    One thing management can do within our own industry is do random checking with our senior clients and those that have applications in process. Make sure they truly understand the loan product they are taking out. Let us make sure the reasons are those that will actually serve our senior clients best interest at heart. In short, let us monitor are own people to make sure they are not doing harm to our seniors!

    I am saying this because let’s face it, we can’t rely on the counseling agencies to be detectives but we can! I am also not saying our loan officers are perpetrating fraud on our seniors. I am just saying that checks and balances of our own staff doing their jobs properly, with the best interest of our seniors always, can only be a good thing!

    It is very true, there is more fraud today being perpetrated on our senior population, especially seniors that own homes with plenty of equity in them.

    We can do our part to help, I know I will and I am sure most of you reading this will as well!

    John A. Smaldone

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