CFPB Takes Issue with Reverse Mortgage Advertising

After a four-year investigation of reverse mortgage marketing practices, the Consumer Financial Protection Bureau (CFPB) has identified several issues with the wording used in advertisements of some of the industry’s largest lenders.

On Wednesday, the CFPB took action against three reverse mortgage lenders, including American Advisors Group (AAG), Reverse Mortgage Solutions (RMS) and Aegean Financial, claiming the companies used misleading language about the possibility of borrowers losing their homes.

Through its investigation beginning January 2012, the CFPB found that the lenders’ advertisements misrepresented that consumers could not lose their homes and that they would have the right to stay in their home for the rest of their lives.


The investigation follows ongoing communication between reverse mortgage lenders and the CFPB, which has warned about deceptive marketing in the past, describing reverse mortgage advertisements as leading to “ambiguity” and “false impressions,” though the Bureau has not given specific guidance when requested from the industry.

For AAG and all of the lenders, the CFPB took issue with marketing language that says potential customers would have no monthly payments with a reverse mortgage, with the Bureau asserting that reverse mortgage borrowers are still required to make monthly payments in the form of property taxes and homeowner’s insurance.

In the case of RMS, the CFPB alleges that the company misrepresented that heirs would inherit the home, without disclosing any conditions of the inheritance. The CFPB asserts that heirs are not able to keep the home after the death of a consumer with a reverse mortgage, but that heirs are only allowed to retain ownership of the home after the consumer’s death if they either repay the reverse mortgage balance or pay 95% of the assessed value of the home.

The Bureau also alleges RMS created a “false sense of urgency” to buy the reverse mortgage product and misrepresented that time limits constrained the availability of the product. In supporting this claim, the CFPB cites one call script that required RMS representatives to tell potential customers that if they didn’t call back by close of business, they would “turn your file down and you will miss out on a tremendous money-saving opportunity.”

As for Aegean Financial, an El Segundo, Calif.-based reverse mortgage broker, the CFPB investigation found that since 2012, the company’s advertisements falsely told potential customers that they would have no payments with a reverse mortgage and claimed that consumers would not be subjected to costs associated with refinancing a reverse mortgage.

Additionally, the CFPB also alleges the company falsely affiliated itself with the government in its Spanish-language advertisements, saying homeowners age 62 or older “qualify for a reverse mortgage from the United States Housing Department,” and included disclosures that were either in small type or “rapidly recited” at the end of commercials.

“In fact, although the Department of Housing and Urban Development provides insurance for the most popular type of reverse mortgage, a reverse mortgage is not a government benefit or a loan from the government,” the CFPB stated in a press release.

Under the terms of Wednesday’s consent order, each of the companies are required to make “clear and prominent disclosures” in their reverse mortgage advertisements and implement a system to ensure their compliance with all laws.

As a result of the consent order, the CFPB has charged civil penalties of $400,000 to AAG; $325,000 to RMS; and $65,000 to Aegean.

“American Advisors Group is deeply committed to helping older Americans achieve stability in retirement,” AAG said in a statement to RMD. “We are dedicated to raising awareness about reverse mortgage loans and educating consumers so they can determine if this is the right solution for their financial situation.”

“We take our regulatory responsibilities seriously and have made a significant investment in our compliance and legal infrastructure to ensure we fully conform to all marketing laws and rules—and better understand how they are interpreted,” AAG added. “As we’ve grown, so have AAG’s ever-evolving marketing and advertising practices.”

The collective $790,000 fine is overshadowed by the multi-million dollar penalties the CFPB has imposed on other financial services providers through its enforcement actions on a variety of practices the Bureau has deemed as unfair, deceptive or abusive acts.

At the high end, the CFPB in September ordered Wells Fargo (NYSE: WFC) to pay a historic $100 million fine, the largest penalty imposed by the Bureau to date, for the bank’s highly-publicized opening of millions of unauthorized deposit and credit card accounts for its own customers.

Written by Jason Oliva

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  • Maybe the CFPB and the plethora of regulatory agencies that were supposed to be eliminated or consolidated into it, should prepare the “call scripts” and write all the advertising material so that the industry doesn’t have to guess about what is allowable. Rather than tell us what we can’t say, maybe they should be required to tell us what we CAN say about reverse mortgages. We all know that the program is so inherently complicated as to defy simple explanation so it would be entertaining to see what they would come up with.

    • hecmvet,

      Difficult to understand? A few years ago most respondents on this website were complaining that the regulators had it wrong and the HECM was much simpler than what they were making it appear to be.

      If the regulators gave us acceptable wording today, FHA regulatory changes could make that wording deceptive tomorrow. Regulators cannot afford nor do they have the staff to provide correct wording for lenders. It is their job of regulators to provide guidelines and when not followed, penalize.

      As to regulators advising us, it is up to your lender to determine what risk it is willing to take in advertising. It is up to regulators to penalize lenders who cross the line and even live on the line. Most approved mortgagees are too lenient in not disciplining their originators and those who are employees of TPOs they are supposed to be supervising.

    • Warren,

      If our ads reflected the integrity you claim, we would have a case AGAINST the attacks of the CFPB. If anything, the CFPB has missed to much of our advertising misinformation and has been too harsh in some of the areas they have criticized.

  • Between the chilly consumer attitude toward HECMs generally, the CFPB, rising rates and a deteriorating secondary market, our industry appears to be teetering on the brink.


      An industry free of cynicism in the modern sense of that word is a rudderless industry. You are simply describing some of the reasons why future endorsements could go even lower. Some of the chill from consumers comes from our draconian financial assessment. Unfortunately lenders got what they pleaded for, FHA style financial assessment removes risk from the pool by simply putting up aggressive, restrictive hurdles for consumers to clear.

      If anything, the ineptitude of the NRMLA committee expressed in the letter sent to HUD years ago showed how little interest approved mortgagees had in being involved in the creation of the financial assessment. Approved mortgagees do not want their employees calling the standards of financial assessment draconian, since FHA would say that the lack of participation by their insured and beneficiaries (the FHA approved lenders who have originated active HECMs) resulted in what we got.

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