On Wednesday, USA Today reported that three reverse mortgage firms entered into consent agreements with the Consumer Financial Protection Bureau for using deceptive advertising. According to the USA Today report, the deceptive advertising consisted of claims by the firms that a consumer could not lose their home in connection with the advertised reverse mortgages. The three firms are American Advisors Group, Reverse Mortgage Solutions, and Aegean Financial.
The investigation by the CFPB found that ads were used that contained scripted language which was misleading. One script contained the question, “Can I Lose My Home?” which was followed by “No you cannot lose your home.” Another claimed, “I can show you how to use a government-insured program that allows you to save money, get cash and live payment-free as long as you live in your home.” Other scripts provided that one could “live in your home for the rest of your life” and that one could “stay in your home forever” and “never be forced from your home.”
American Advisors had used ads in which the late Fred Thompson had characterized their product as “a safe and effective financial tool.” Reverse mortgages are used to “cash out” the equity in a consumer’s home. This can result in a lump sum payment or payments over time to the consumer. So, depending on the circumstances of each case, reverse mortgages can be or appear to be an attractive alternative for some consumers. However, as the CFPB noted, consumers who enter into these transactions still must pay property taxes, insurance, and maintenance costs associated with their homes. If they default and do not comply with the terms of the reverse mortgage, consumers can lose their homes.
Firms Tricked Consumers
Richard Cordray, the CFPB Director, stated that the three firms had tricked consumers into believing that their homes could not be lost. The three firms were fined $790,000.00 collectively according to USA Today report. The consent agreements also require the firms to make clear and proper disclosures in their reverse mortgage advertising and to put internal compliance measures in place to ensure that all laws are obeyed regarding their advertising.
Reverse Mortgage Solutions is based in Houston, Texas and is licensed in 48 states. The firm stated that it was pleased with the settlement and that it would improve its procedures for the future. American Advisors Group is licensed in 49 states and the District of Columbia. In a formal statement, the firm stated that it had made a significant investment in its compliance and legal infrastructure to conform to all marketing laws and rules. According to the USA Today report, Aegean Financial, which is licensed in five states, did not respond to messages seeking comment on the settlement.
If you are considering a reverse mortgage, it is very important to carefully review all documents and notices regarding the transaction. Ask questions and take your time. Do not allow anyone to pressure or rush you into signing anything. If you are unsure, you should consult with competent professionals to assist you in analyzing the proposed reverse mortgage in light of your needs and requirements.
Ed Woods is the Managing Attorney of several of the Bond & Botes Law Offices throughout Mississippi. He holds a Bachelor of Science from the University of Southern Mississippi, and a Juris Doctorate from Mississippi College School of Law. Ed puts his extensive knowledge of bankruptcy law to use defending consumers from debt collection lawsuits and more. Read his full bio here.