HECMs Account for 5% of Older Americans’ CFPB Mortgage Complaints

Complaints related to the Home Equity Conversion Mortgage program accounted for about 5% of all mortgage-related complaints from older Americans, according to a new analysis of Consumer Financial Protection Bureau data.

Issues with mortgages took up the largest share of reported complaints by citizens older than 62, representing 31% of more than 72,000 recorded incidents; of those, 5% consisted of reverse mortgage problems, the U.S. PIRG Education Fund found.

The Washington, D.C.-based organization — which represents state-level public interest research groups (PIRGs) — found complaints from reverse mortgage holders who were unable to access their lines of credit or had issues maintaining mandatory tax-and-insurance payments.

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“The risks of such products are not fully understood by consumers, and the Consumer [Financial Protection] Bureau has taken action against reverse mortgage companies for misleading consumers about risks,” the U.S. PIRG wrote in its report.

These statistics differ slightly from the CFPB’s regular release of monthly data, which most recently found that 1.5% of mortgage complaints related to reverse mortgages; however, the bureau used the total number of submissions received between January and March 2017, while the U.S. PIRG used all available complaints submitted by users over the age of 62. Only 54% of respondents indicated their ages, according to both the CFPB and U.S. PIRG.

“Compared to general mortgage complaints submitted by older consumers, reverse mortgage complaints are slightly more likely to be focused on problems early in the mortgage process,” the organization noted, pointing out that a quarter of HECM complaints revolved around applying for a new mortgage or a refinance, or the mortgage-closing process.

Still, the vast majority of remaining issues stemmed from payment issues, U.S. PIRG found.

The organization supports the continued existence of the CFPB in its current form, criticizing the Financial Choice Act in its release announcing the statistics; that piece of legislation, passed by the House in June, would substantially roll back the CFPB’s authority and oversight power.

“Gutting the CFPB makes it easier for financial scammers to move against older consumers, threatening their homes and retirement savings,” U.S. PIRG consumer program director Ed Mierzwinski said in a statement.

Written by Alex Spanko

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  • The stats are revealing especially when broken down by age. The complaints about HECM servicing are much more prevalent than expected especially when focusing on payout issues. Now bring into play those not disclosing their age and the issue could be much higher.

    Also the bragging about adequate originator education seems also exposed in the stats. I have always doubted those who claim that all of THEIR borrowers know everything they need to know about HECMs by the time they have closed their HECMs. Some even claim that same level of education for all of their prospects. It is these originators that seem to believe they know everything about HECMs and thus their prospects and borrowers have gained that same level of knowledge (perhaps through osmosis, telepathy, or some variant). In this case, the CFPB has the credibility.

  • I can show just about any stat I want with a spreadsheet, based on the period I select, or as in this case, targeting the age of HECM borrowers to increase the complaint %. Yes, people who own cars have a higher rate of automotive complaints than those who do not own cars. No kidding.

    Based on the nature of the complaints, the inability to make insurance and tax payments, which likely would have happened years earlier without the borrower’s access to their equity, or inability to access their credit line in a time when HUD keeps reducing it, despite the complaints who the need increasing rather than decreasing, there is no “there, there.” Perhaps as a country we need to address the paltry Social Security pensions non government workers receive, and not the ability of a senior to leverage the equity of property they already paid for.

  • No doubt that you are correct. The more you get involved in this industry, the more you realize that the servicing side of this business is a disaster. You can do a quick Google search of the companies that use their own name, like Champion, and see what I mean. The fact that they just took on 84K Wells Fargo customers is not a good thing. It had gotten so bad with RMS, that I wouldn’t work with any wholesalers that were selling to them.

    Now I have a better understanding of why many realtors are against the product. It’s because their experience is from the perspective of a title company trying to obtain a payoff or an heir that is trying to deal with the probate of an estate. Many of these servicers will say they didn’t receive a fax when you have a fax confirmation in hand. They put the onus on you to call and follow up on every communication that you send, because they cannot be counted on to receive it, log it, and act on it.

    I’m sure there’s no simple solution as there must be funds available to pay for high quality servicing, but this industry needs to do better. If poor servicing isn’t having an impact on our origination numbers due to reputation issues, then it will in the future.

  • Ed,

    The largest state in the union has absolutely no requirement that an attorney be involved in a mortgage or purchase of real estate. I understand that in many other states that is not the case.

    You are right to take shots at lenders but many times the lender is not involved. When most lenders place a HECM in a Ginnie Mae issuance, they rarely have any borrower contact with the borrower after that. All borrower contact is normally handled by a servicing entity. That is not true with some lenders who service their own loans even after issuance.

    The CFPB has a PR problem. Most lenders hate them but they have effectively stopped or penalized poor business practices of lenders generally so it is understandable why the PR problem exists.

  • Hi all,

    I am coming into this a little late, but like many here, I believe that the majority of the complaints have to do with post origination issues, not the originators. I will also say that many originators do give really terrific information to their clients, but the servicing side does not follow through. Very early in my legal career, I worked for John Hancock Insurance on the Duhaime settlement. I learned that there were two very different companies, and they knew very little about each other. The origination side, which was dealing with the three martini lunches and running wild, and the servicing side which was very staid, professional, and strictly by the book. (Kind of the opposite of today’s HECM world.) I kept meeting people from the servicing side who were absolutely shocked by what happened on the sales side. They claimed to never have known what was happening. Personally, I thought it was willful blindness.

    Well, today’s HECM world is similar. One of the things I do, in addition to counseling, is foreclosure prevention. I cannot tell you how many times that a HECM is being foreclosed on for lack of insurance that is present, taxes that the company paid the week before they were due to the town/city, or for repairs that were either already complete or in the process of being completed. And, worse, you never deal with the same person when you call in, it is always someone different. No matter what notes are in the computer, nearly everything starts from scratch. Then they seem delighted to tell you “no,” and send you of deeper into the foreclosure world. (I am not even mentioning the number of faxes, letters, e-mails, etc. that just disappear.) Unfortunately, the HECM world is very much like the forward mortgage servicing world of a decade or more ago. I am not surprised by the complaints; if anything, I am surprised there are not more of them.

    Frank J. Kautz, II
    Staff Attorney

    Community Service Network, Inc.
    52 Broadway
    Stoneham, MA 02180
    (781) 438-1977
    (781) 438-6037 fax
    [email protected]

    • Well said Frank. The scope of these issues is larger than we are aware of. I’m hopeful that it doesn’t take the CFPB to make this right, but I’m afraid that is what I expect to happen.

  • The_Cynic,

    Lets me take your reply and allow me to try and answer it step by step:

    First off, yes, I call it a committee, it is actually refereed to as a “Bureau”, that is a laugh!

    You need to go back to 2010 to when the bill was passed and read the entire “Financial Regulatory Reform Bill”, commonly referred to as the Dodd-Frank Bill, 2,346 pages worth! Once read and understood, you then and only then, really understand the scam that has been perpetrated on the American people!

    It is very complicated and difficult to understand without having some legal Beatles next to you. In short, the bill takes control of our entire financial system!

    The bill has been repealed by the house but sits as most bills do in the senate awaiting who knows what!

    Now as far as we as loan officers having a fiduciary responsibility to our clients, YOU are right Cynic, we do not by the legal meaning of the word have a fiduciary responsibility. I was more referring to it as an expression, “Fiduciary”, putting us in a more responsible role because of the nature of our clients, being seniors!

    The “CFPB” by the way stands for the “Consumer Financial Protection Bureau”, not board.

    Another thing, this so called committee, board, bureau or what ever you want to call them, are anything else but a committee of individuals out to protect the public.

    The CFPB, VIA the Dodd-Frank bill vehicle, has done more harm through its autonomous powers granted to it through regulatory implementation on the public, on small community banks, small businesses and you name it!

    Now, you say, “My comment is a clear expression of my opinion and it my comment lacks substantial facts”!

    Well my friend, go read the “Financial Regulatory Reform Bill”, Take a look for your self what I have been talking about and what I commented about!

    I have fought this bill since its inception through appeals to legislators, speeches before business groups, you name it but to no avail. The closest its come to fruition of being repealed is with the house, as I mentioned earlier, what the future of this bill is, heaven only knows!

    But I will tell you and anyone else who even cares to read my reply to you, the Dodd-Frank bill carries as much if NOT more danger than Obamacare as far as turning this great nation into a socialistic country!!!

    John A. Smaldone
    http://www.hanover-financial.com

      • Hey John,

        It is there for your viewing.

        The comment shows that it was written yesterday.

        It starts with your first name which is followed by the words: “First things first.”

      • Hey John,

        You will find my two day old response as a comment in this thread that starts with your first name and then states: “First things first.”

  • John,

    First things first. You are right I got the name wrong and you are right it is a bureau, just as the FBI is a bureau. The Federal Bureau of Investigation has always been run by one director not a committee, just like the Consumer Financial Protection Bureau has been run by just one director, not a committee. Perhaps you have forgotten J. Edgar Hoover?

    For someone who read the bill as originally proposed with some legal “Beatles” (sic), how did you miss this? It was and remains the primary target of the Republicans, if overall repeal of the CFPB proves impossible.

    To help you, go to — https://www.congress.gov/bill/111th-congress/house-bill/4173/text?r=1 — which is H.R. 4173 of the 111th Congress which was introduced into the House Financial Services Committee on December 2, 2009 by Chairman Barney Frank. Under Title X which is titled “Bureau of Consumer Financial Protection.” In Section 1011 titled “Establishment of the Bureau of Consumer Financial Protection” subsection (b), the following is stated:

    “Director and Deputy Director.–
    (1) In general.–There is established the position of the
    Director, who shall serve as the head of the Bureau.”

    As to authority, the position of Director within this Bureau is no different in relationship than the HUD Secretary to the Department of HUD. Perhaps you read Section 1011(b) and simply forgot what you read. The Congressional Republicans have not.

    John, the word “Bill” has never appeared in the title to the proposal. Beyond that, you are one of the few people in the country who refer to Dodd-Frank as a bill rather than the Act that it is. Just looking at the language you use, the House has never repealed the Dodd-Frank Act or Bill. It has voted to do that but it cannot repeal either a bill or an act by itself. That requires at a minimum consensus with the Senate which has NEVER happened. Making up your own terminology does not help anyone except psychologically.

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