More proof that these are horror stories in the making. This is from a 2016 article in “Consumer Reports”.
Reverse-Mortgage Ads Still Making Misleading Claims, Federal Regulators Say:
Senior alert: Consumer watchdogs say reverse-mortgage companies are still trying to trick you with ads promising a risk-free way to tap the equity in your home.
That’s the message from the Consumer Financial Protection Bureau, which on December 7, 2016, ordered three reverse-mortgage companies to stop running deceptive ads and pay almost $800,000 in total in fines for making false promises to potential borrowers and claiming that consumers could never lose their homes.
But seniors who don’t keep up with payments on taxes, insurance, utilities, and upkeep risk defaulting on the loans and being forced to move out.
“These companies tricked consumers into believing they could not lose their homes with a reverse mortgage,” said CFPB Director Richard Cordray. “All mortgage brokers and lenders need to abide by federal advertising disclosure requirements in promoting their products.”
The CFPB says these companies, in voluminous print, television, and radio ads, and distribution of direct-marketing information kits, made false claims, including that borrowers would “always retain ownership” and “can’t be forced to leave.”
The CFPB said the ads also claimed there are no costs to reverse mortgages, when in fact you have credit report fees, title insurance costs, appraisal costs, other closing costs, and a fee for government mortgage insurance.
A Troubled History
Though a number of regulatory changes have been made to protect consumers, advertising remains a troubling component of the reverse-mortgage lending business.
Lenders barrage potential borrowers with ads featuring B-list actors such as Henry “The Fonz” Winkler and Robert Wagner aggressively pitching reverse mortgages to seniors as a risk-free way to supplement retirement income.
American Advisors ran TV ads almost daily and distributed its information kits to more than 1 million people. Its newest pitchman started in September: Tom Selleck.
This isn’t the first time the CFPB has cracked down on misleading advertising by the industry. Last year the bureau issued a report saying that many reverse-mortgage ads are inaccurate or omit important information.
The CFPB has sent warning letters (PDF) to mortgage advertisers targeting older Americans and took an enforcement action against a reverse-mortgage lender in 2015 for misrepresenting itself as a government agency.
Consumer Reports has also long been concerned about the risks of reverse mortgages and advocated for important changes for more disclosures. CR helped make it mandatory for seniors in California to fill out a detailed questionnaire walking them through the loan’s possible consequences before filling out a mortgage application.
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