Contrary to initial findings by the Consumer Financial Protection Bureau in a recent in-depth report on reverse mortgages, a new study finds: Consumers are informed in their reverse mortgage decision-making.
By way of informing comments submitted by the National Reverse Mortgage Lenders Association to the CFPB in response to the bureau’s request for comments regarding reverse mortgage use, NRMLA commissioned a survey of more than 500 reverse mortgage borrowers to get firsthand perspective through the eyes of consumers.
Through a third-party consumer research and polling company, ORC International, borrowers were interviewed over the phone.
A departure from the CFPB’s conclusion that reverse mortgage borrowers were confused by the loans or did not have adequate information before taking them, ORC’s discussions with borrowers found that by and large, consumers were very well informed before making the decision.
In fact, 87% of the 501 people interviewed reported having consulted in advance with someone they considered to be knowledgable—including reverse mortgage counselors, family members, friends, financial planners, attorneys, accountants, and loan officers.
Twenty-five percent reported having talked with a financial planner or advisor in advance of moving forward with the loan process and 21% spoke with an attorney, accountant or another trusted advisor.
“All in all, it appears from our data collection that consumers are increasingly seeking advice from knowledgeable parties whom they trust, shopping more vigorously, making more informed decisions on lender and product selection, consulting more often with counselors and reviewing documents before closing, often with multiple parties—all positive trends,” NRMLA writes in the comments.
In addition to detailing the research process consumers take before getting a reverse mortgage, NRMLA looked into the ways borrowers were using their reverse mortgage proceeds and whether their decisions were financially prudent. The findings show borrowers are most often conservative with their loan uses.
“It is apparent to us, based on the survey results, as well as anecdotal evidence from our members who often have ongoing contact with their clients, that, by and large, HECM borrowers utilize their funds judiciously and purposefully, and are fairly conservative with where they “park” any unused funds,” the comments state. “On the one hand, they might experience a “negative arbitrage” on funds they are holding. On the other hand, they are rarely putting those funds at risk.”
Written by Elizabeth Ecker