In a most likely preview of a location subject to future policy and enforcement, in early June the Consumer Financial Defense Bureau (CFPB) Office for Older Americans launched outcomes of a focus group research study on reverse home loan ads and likewiseas well as released an advisory relating to such ads.
A reverse home loan is a homea home mortgage that enables older house owners– normally age 62 or older– to access the equity in their homes and defer payment of the loan until they die, offer, or step.
The loan earnings are typically provided to the borrowers as lump-sum payments, monthly payments, or as lines of credit. Market reports indicate that the reverse home loan market is only about 1 % the size of the conventional home mortgage market, but with an aging population it is expected that the marketplace will certainly grow.
The research involved an evaluation by focus groups of 97 advertisements for reverse home mortgages on TELEVISION, radio, in print, and on the internet.
Following interviews, the study found that the focus groups were confused about reverse mortgages being loans. There was an incorrecta misconception that the loans are a kind of government advantage. And some thought that a reverse home loan guaranteed the borrower could remain in the house for the rest of their lives.
In addition to the interviews, CFPB staffers evaluated the ads and concluded that, [A] mong the advertisements we gathered, on their face, many consisted of confusing, insufficient, and inaccurate statements concerning borrower requirements, government insurance and customer dangers.
The study recognized numerous possible issues with the ads including:
o Ambiguity relating to the realitythat reverse mortgages are loans.
o Incorrect impressions about government affiliation.
o Difficult-to-read greatsmall print.
o Celebrity endorsements that suggest dependability and trust.
o False impressions about monetary security and staying in the home for the remainder of the customers life.
The concerns recognized in the research study could each be a prospective target for regulative efforts such as improved or modified disclosure requirements for reverse mortgages. The determined locations also raise implications for direct exposure as a result of the CFPBs continued aggressive pursuit of enforcement actions targeting conduct it considers to be an unjust, misleading, violent act or practice (UDAAP).
About the author
Courtney Gilmer is a bankruptcy and creditors rights shareholder in the Nashville workplace of Baker Donelson. She represents lenders, businesses, protected lenders and creditor committees in bankruptcy procedures, financial transactions, business reorganizations, and state and federal court litigation.