Ads for re­verse mort­gages can mis­lead: US agency


We’ve seen the TV ad pitches from celebri­ties like “The Fonz” Henry Win­kler and ac­tor and exse­n­a­tor Fred Thomp­son, tout­ing the benefits of re­verse mort­gages for older home­own­ers.

Now U.S. reg­u­la­tors are warn­ing: Don’t be fooled. Many ads don’t tell the whole story about re­verse mort­gages.

The Con­sumer Fi­nan­cial Pro­tec­tion Bureau said Thurs­day that a study it con­ducted with older home­own­ers found they were given the false im­pres­sion by the ads that re­verse mort­gages are a gov­ern­ment ben­e­fit and en­sure con­sumers can stay in their homes for the rest of their lives.

The agency said peo­ple should be aware of the risks of re­verse mort­gages, which are loans for home­own­ers 62 or older that must be re­paid with in­ter­est and can de­plete se­niors’ funds.

Se­niors tak­ing out re­verse mort­gages can even lose their homes. About 10 per­cent of bor­row­ers end up de­fault­ing on their re­verse mort­gages, ac­cord­ing to the agency — roughly dou­ble the rate of con­ven­tional home mort­gages.

A re­verse mort­gage al­lows bor­row­ers to re­ceive cash or a line of credit tap­ping the ac­cu­mu­lated eq­uity in their homes. Se­niors of­ten take out the loans to help pay off credit card bills or remodel their kitchen. The loan isn’t paid down in monthly in­stall­ments. The loan bal­ance in­creases and comes due when the bor­rower dies, moves or sells the home, or de­faults on other obligations such as in­sur­ance or taxes.

Most of the mort­gages are in­sured by the Fed­eral Hous­ing Ad­min­is­tra­tion. But they aren’t a risk- free gov­ern­ment ben­e­fit, a false im­pres­sion that the CFPB found was given by the re­verse mort­gage ad­ver­tis­ing.

Most of the 97 dif­fer­ent TV, ra­dio, print and on­line ads re­viewed by the CFPB failed to men­tion the risks of re­verse mort­gages, the agency said.

“Or, if they did, they were so buried in the fine print that con­sumers did not pick up on ... key as­pects of the loan,” CFPB Direc­tor Richard Cor­dray said in a con­fer­ence call with re­porters. “In­deed, many re­verse mort­gage ads did not even men­tion any­thing about in­ter­est rates, re­pay­ment terms or other cru­cial re­quire­ments of the loan.”

Cor­dray said the reg­u­la­tors are es­pe­cially con­cerned be­cause re­verse mort­gages are com­pli­cated and are mar­keted to older home­own­ers, a group known to be vul­ner­a­ble to de­cep­tive ad­ver­tis­ing or pitches.

As part of its re­view, the CFPB in­ter­viewed around 60 home­own­ers aged 62 and older in fo­cus groups and in in­di­vid­ual in­ter­views in Chicago, Los An­ge­les and Wash­ing­ton, D.C.

The trade group rep­re­sent­ing re­verse mort­gage lenders said it has a code of ethics and spe­cific guid­ance for eth­i­cal ad­ver­tis­ing for its mem­bers.

“We share view­ers’ con­cerns that any ad­ver­tis­ing should be ac­cu­rate,” Peter Bell, pres­i­dent of the Na­tional Re­verse Mort­gage Lenders As­so­ci­a­tion, said in a state­ment Thurs­day. “As an as­so­ci­a­tion we are com­mit­ted to ed­u­cat­ing con­sumers about the pros and cons of re­verse mort­gages, train­ing lenders to be sen­si­tive to clients’ needs, and en­forc­ing our code of ethics and pro­fes­sional re­spon­si­bil­ity.”

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