Cordray Seeks CFPB Board’s Help to Spread Reverse Mortgage Warnings

Richard Cordray used a speech before the Consumer Advisory Board to advocate recent government warnings about the use of reverse mortgages to delay Social Security benefits.

Cordray, director of the Consumer Financial Protection Bureau, pointed to a report his agency released this past summer, which found that the costs of originating a Home Equity Conversion Mortgage often outweigh the benefits of delaying Social Security payments to receive higher payouts.

“The report responded to the increasing promotion of this strategy by financial writers and those in the reverse mortgage industry, often without discussing the risks involved,” Cordray said in his remarks last week in Tampa, Fla.


In addition to the upfront costs, Cordray and the CFPB cited the fact that HECMs reduce the amount of home equity available to seniors over time.

“As a result, those who follow this strategy to sell their homes may be unable to relocate or to handle a financial shock,” he said. “We will be discussing this further, and, in particular, would be glad to hear from you about how we can get this information across to more consumers around the country who may be facing these same circumstances.”

The Consumer Advisory Board includes a variety of players from both the financial services industry and the nonprofit advocacy sector, which the CFPB terms “a crowdsourced group of experts.”

“Our dialogue with our CAB members helps improve the ways that consumer financial markets work for American consumers,” Cordray told the board. “The CAB is a diverse group that identifies key issues cropping up around the country and presents broader perspectives on issues that sharpen our approach to consumer financial protection.”

Multiple financial planners later disputed the CFPB’s findings, with American College of Financial Planning professor Jamie Hopkins claiming that analysis didn’t take into account the benefits of delaying Social Security in a longer-than-average retirement; the bureau based its calculations on the average lifespan of American retirees.

Retirement planner Curtis Cloke, meanwhile, took the CFPB to task for not considering the tax upsides, according to an interview he gave to Investment News.

Cordray rumors

Cordray’s address to the Consumer Advisory Board — which also touched on payday lending, auto loans, and consumers’ overall financial wellbeing — comes at a pivotal time for the director, who has been rumored since the summer to be a potential Democratic candidate for the Ohio governorship in 2018.

Republicans have longed for Cordray’s departure since he was appointed to the position in 2011, but President Trump has reportedly resisted calls to fire him: Just last week, the president indicating that doing so would make Cordray a “martyr,” according to a report from CNBC.

Cordray has until Feb. 1 to file paperwork to enter the Ohio governor’s race. The Buckeye State’s current governor, former 2016 GOP presidential hopeful and Trump critic John Kasich, cannot run again due to term limits.

Written by Alex Spanko

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  • >>which found that the costs of originating a Home Equity Conversion Mortgage

    Costs? For years I was able to pay all costs – until October 2nd. And so were many of my peers … but not anymore.

  • This is clearly one of weakest strategies promoted by the industry. I would like to see the projections Mr. Cloke offers in support of his statement on taxes. Generally bunching up Social Security benefits into fewer years (assuming the senior lives well beyond 70), means proportionately greater taxable income and tax on Social Security benefits for most retirees subject to income tax related to their Social Security benefits. That same article quotes Mr. Cloke stating that he would not advise his clients utilizing the strategy if that was the primary purpose of obtaining a HECM.

    I am not against the strategy. I am against inadequate presentations of the extent of risks so to that extent I agree with Director Cordray. The industry has done a very poor job of trying to vindicate the use of this strategy. If the industry shows no more reactive (forget about proactive) justification than we have seen so far, the industry belongs being bad mouthed about it, deservedly or not.

    None of the academicians who promised research papers in support of this strategy have stepped forward with their work. This strategy seems simple but it is full of risk and difficult to conceptualize in a manner that can be easily and correctly presented.

  • I have to agree with my friend Jim Veale. The delay of taking social security by using the HECM as an interim income stream is the weakest strategy I have seen.

    Now, if the HECM was used for other purposes as well, such as paying off existing debt on the home and paying off other debt, then you would be accomplishing many objectives at the same time.

    I can’t say I am a champion supporter of Director Cordray or the CFPB but in this case, I side with Jim Veale!

    John A. Smaldone

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