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CFPB Finds Reverse Mortgage Ads Leave Consumers Confused and Mislead
The Consumer Financial Protection Bureau released the results of a focus group finding that many reverse mortgage ads are either inaccurate, confusing or misleading.
If you watch even a moderate amount of television you’ve seen several reverse mortgage ads from lenders both large and small. While the effort to inform older homeowners about the benefits of the program are well-intentioned the end result may be quite different. The CFPB issued the results of their focus group study on reverse mortgage ads interviewing nearly 60 age-legible homeowners in Chicago, Los Angeles and Washington D.C.
The study drew from 97 unique reverse mortgage ads from television, radio, internet and print media. The responses from the participants was eye-opening. Some found it difficult to comprehend that the program is a loan with fees and interest which must ultimately be repaid. Strange considering the common term reverse mortgage should clearly inform one that…
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13 Comments
Sounds more like a government agency trying to get even more control of the public than they already have. If people really thought this was free money everyone would take it. Very few do. As one ages you learn to use the tool you have available. Crying foul is something people use to protect themselves as they age and their body fails. It gets to be a habit. Could it be that those interviewing these old people slant the results, in order to get more pay and more power?
However there are those that present this program as an entitlement–it is not nor has this ever been an government entitlement . People using this to sell the program should stop right now.!! Nor is it magic!! People have to qualify for this program and it is what they have done or will do in the future that allows this type of retirement.
Boyd,
This is not a fight with some regulator but a real perception problem that causes many seniors to turn off to HECMs. When they hear that you do not pay the lender but the lender pays you, they believe that what follows is a sales job they do not want to be taken in by.
Who would listen to anyone saying that it is time for the home to pay you. Is our ads a source of why more financially astute seniors have not been pounding on our doors demanding HHECMs
Misleading yes, Misunderstood, yes, Costly yes, Overly Complicated yes. The program defies simple explanation and if you attempt to make it understandable you are fraudulently misrepresenting it! What fun!
Costly? Can anyone name another loan product that charges origination fees based upon the appraised value instead of the loan amount?
Our industry leadership, (no I don’t mean NRMLA) has focused too much on marketing and sales and not enough on “Regulatory Policy” and now we are experiencing the results of this neglect.
I haven’t charged more than $500 origination in years and in most cases my lender credit covers at least half of the closing costs. Doesn’t sound like a very expensive loan at all to me.
Dear TOPHECM, you can’t possibly be serious! What do you think happens that allows you to offer such “FREE” loans? This is astonishing to me that you could be in this business and say something like this without the slightest hint of irony or grasp of the circumstances. This clearly helps explain what ails our industry. Thanks for the insight and good luck. Some day when you have a minute look into the definition of “Premium Pricing”.
Dear HECMVET,
You’re really the guy who was voice for the old Hanna Barbara cartoon character Glum right? You know the doom and gloom guy who sounds like Ben Stein and always says “It’ll Never Work, We’re All Going Die!” Seriously man, Why Are You Still In This Business?
It’s amazing to me that any study would be done with a sampling of 60 people.
However, your points are well taken. When forward mortgage ad’s appear it is always assumed that people know it’s a loan that needs to be repaid.
Another point you made about education and counseling should always take place even prior to sending your client to mandatory counseling. I simply cannot believe seniors or their caretakers sign onto a reverse mortgage without understanding that it is a loan.
I could go on but suffice it to say that the CFPB is a little to overbearing on the mortgage industry as a whole. Their biggest accomplishment to date is to drive up costs to all borrowers and limit product availability.
Brent,
You are right to say that it is always assumed that people understand thàt forward mortgage ads are about loans that have to be repaid but here is one problem with our ads. We say that why reverse mortgages are reverse is because they are the reverse of a traditional mortgage; you DON’T pay the lender, the lender pays you. Or how about the nonsensical line that isn’t time for the HOME to start paying you. Those lines confused the HECM out of me for far too long.
No matter who is right on this issue our endorsement numbers continue to decline despite higher home values, a better economy, a larger senior population, better understanding of the retirement funding gap, well respected financial advisors recommending HECMs, etc.
We need to learn to stop reacting to criticism and use it to improve. Our ads could be better, much better. Defending many reverse mortgage ads only makes us look like the sleezy originators some accuse of us being.
Cynic,
You make valid points and ones the we all should heed. Defending only promotes more cynicism.
That being said, marketing serves two important functions; one is getting the consumer enough information to generate interest (without misleading them) and two to generate leads for individuals and companies.
I think everyone must admit that no matter how noble we want to be, we are in the business of making a living albeit delivering a service/product that has the distinct ability to enhance peoples lives if used properly.
We have to police ourselves and make sure that the profit motive does not interfere with doing the right thing and making sure that any product or service we recommend fits the desired need.
I am however, leery of government overreach much of which comes about by fear-mongering by the very regulatory body’s that get bloated so they can create more and more onerous regulations that they can enforce.
I would suggest that our industry get in front of this and head the regulators off at the pass by helping us regulate ourselves as the NRMLA is doing with best practices.
Brent,
Marketing is far broader than you give it credit for being. What you are confusing are ads with marketing and one of our regulators is telling us is that a significant percentage of our most viewed ads are misleading! (Perhaps your employer can help you see how much greater marketing is in this industry than ads which are just a small but important part of marketing.)
Like many in the industry you confuse what NRMLA is and what it can and will do. Unlike the rulres of state bar associations which have the backing of law, NRMLA rules are rather feckless since they only govern members. If you are not a member you are not bound by its rules; few TPOs are members of NRMLA. There are few things that NRMLA can do to members who do not follow its rules. NRMLA is more of a way to facilitate lobbying and deal with lender issues as a trade association than being a governing body whose rules are automatically recognized as governing rules under state law like those of the AICPA (unless there are state laws or regulations in conflict).
Yet the foregoing does NOT mean that NRMLA is useless or not vital to the industry. If the CFPB will recognize NRMLA and work with it so that we can understand its point of view when it comes to the ads the CFPB references then there can be potential benefits to consumers , lenders, and originators.
BOY what a lot of good feed back on thjis one ,,, did the CFPB hire a bunch of young attorneys that can’t even understand advertising ? if it is false adds it’s false adds otherwise leave us a lone ,,speaking of false and misleading adds I see on my computer on a daily basis why don’t they go after them ?? that would clean up a bunch of misunderstanding that the public has,, the one about you can receive up to $625,000 ,,,, the L.O.s buying these bogus leads are just as guilty as the the ones running the adds,,,,
Cliff,
You make a great point. Find the misleading ads and put the Marketers on notice.
If there was no crime , there would be no Cops.
It makes you wonder if it is more advantageous to make noise about a problem then to fix the problem.
BTW, How many people can explain a 30 year mortgage? Folks loose their homes to these everyday?
Lance,
Anyone who does not have or has not had a fully amortized thirty year mortgage is far less likely to be able to explain one than one who has. The issue has nothing to do with the ability to explain a reverse mortgage but rather understanding it to be something it is not due to our own ads.
For example, despite the word mortgage in its name I have talked to seniors who have protested when I have stated that a reverse mortgage is first and foremost a non-recours mortgage pointing to a Wells Fargo ad which claimed that it is the HOME that pays the participant not proceeds from debt!!