Feds fine reverse mortgage lenders for false advertising
“In past columns I have written that reverse mortgages have become more advantageous for consumers aged 62 and older. That’s because of recent HUD regulatory changes and because some lenders have reduced the initial costs of obtaining these mortgages.
Still, consumers must beware. The Consumer Financial Protection Bureau (CFPB) has identified three lenders who have engaged in deceptive and illegal advertising practices: American Advisors Group, Reverse Mortgage Solutions and Aegean Financial.
Together, these companies have incurred civil penalties totaling $790,000 and will have to modify their advertising policies so that consumers will not be deceived.
Some of the illegal advertisements in question stated that borrowers could not lose their homes, cannot be forced to leave and/or that always retain ownership. In reality, reverse mortgage contracts specify that borrowers must pay homeowner insurance and real estate taxes, maintain the property and comply with other requirements. If the borrower does not do all of these things, the lender can foreclose on the home. If the borrower faces foreclosure, he will lose his home, will be forced to leave and will no longer retain ownership.
In the future, the lenders will have to modify their advertising so that borrowers know that unless they continue to pay all related homeowner insurance and real estate taxes and maintain their property, they can lose their property through foreclosure.”