This is why you can’t rely on the in-house compliance persons at the big lenders.

By Barbara S. Mishkin on December 8th, 2016

The CFPB announced that it entered into consent orders with three reverse mortgage companies to settle the CFPB’s allegations that the companies engaged in deceptive advertising in violation of the Mortgage Acts and Practices-Advertising Rule (Regulation N) and the Consumer Financial Protection Act.  Each of the consent orders requires payment of a civil money penalty to the CFPB.

According to the CFPB’s consent order with American Advisors Group (AAG) (described in the consent order as the “largest reverse mortgage lender in the United States”), AAG’s advertisements (consisting of television advertisements and information kits that included a DVD and several brochures) misrepresented that a consumer with a reverse mortgage could not lose the home and could stay in the home for the rest of the consumer’s life.  The advertisements also allegedly misrepresented that a consumer with a reverse mortgage would have no monthly payments and the mortgage would eliminate all of the consumer’s debts.  The CFPB claimed that these statements were misrepresentations because (1) a consumer with a reverse mortgage still has payments and can default and lose the  home by failing to comply with the loan terms such as requirements to pay property taxes or make homeowner’s insurance payments, and (2) a reverse mortgage is a debt and therefore cannot be used to eliminate all of a consumer’s debt.

In addition to prohibiting AAG  from making similar misrepresentations in future advertising and requiring AAG to implement a compliance plan that includes an advertising compliance policy, the consent order requires AAG to pay a civil money penalty of $400,000.

According to the CFPB’s consent order with Reverse Mortgage Solutions (RMS), a reverse mortgage lender, RMS’s advertisements (which included television, radio, print, direct mail, and online advertisements) similarly misrepresented that a consumer with a reverse mortgage could not lose the home and could stay in the home for the rest of the consumer’s life, would have no monthly payments, and the mortgage would eliminate all of the consumer’s debts.  The CFPB claimed that these statements were misrepresentations for the same reasons asserted in the AAG consent order.

The CFPB also alleged that the company misrepresented that a consumer’s heirs would inherit the home and that a consumer’s ability to obtain a reverse mortgage was time limited.  The CFPB claimed that these statements were misrepresentations because, respectively, heirs can only retain ownership of the home after the consumer’s death by either repaying the reverse mortgage or paying 95 percent of the home’s assessed value, and there was in fact no relevant time limit on a consumer’s ability to obtain a reverse mortgage.

In addition to prohibiting RMS  from making similar misrepresentations in future advertising and requiring RMS to implement a compliance plan that includes an advertising compliance policy, the consent order requires AAG to pay a civil money penalty of $325,000.

According to the CFPB’s consent order with Aegean Financial (AF), a reverse mortgage broker, AF’s advertisements (which included print, direct mail, radio, and online advertisements) similarly misrepresented that a consumer with a reverse mortgage could not lose the home and could stay in the home for the rest of the consumer’s life, and would have no monthly payments.  The CFPB claimed that these statements were misrepresentations for the same reasons asserted in the AAG consent order.

The CFPB also alleged that AF misrepresented that a consumer who refinanced a reverse mortgage would not be subject to costs.  According to the CFPB, this statement was a misrepresentation because a consumer who refinanced a reverse mortgage would incur costs such as credit report fees, flood certification fees, title insurance costs, appraisal costs, and other closing costs.  The CFPB also claimed that the statement in AF’s Spanish-language advertisements that “if you are 62 years old or older and you own a house, we have good news for you; you qualify for a reverse mortgage from the United States Housing Department” was misleading.  According to the CFPB, the statement was misleading because, while HUD provides insurance for the most popular type of reverse mortgage, a reverse mortgage is not a government benefit or  loan from the government and the product is not  endorsed or sponsored by the government.  The CFPB also alleged that AF failed to keep records of its advertisements as required by Regulation N.

In addition to prohibiting AF from making similar misrepresentations or misleading statements in future advertising and requiring RMS to implement a compliance plan that includes an advertising compliance policy, the consent order requires AAG to pay a civil money penalty of $65,000.

Please remember, Compliance Services reviews your advertising at no charge. Send it to us BEFORE you get into trouble.

 Respectfully,

 Nelson A. Locke, Esq.

Mortgage Industry Compliance Expert

Attorney and Expert Witness

Office (800) 656-4584

Cell (305) 951-2785

http://www.lockelaw.us

http://expertlenderservices.com

 

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