A congressionally-mandated study of reverse mortgages published this week by the Consumer Financial Protection Bureau concludes that elderly consumers are not getting enough information to help them make well-informed decisions and that better disclosures and better counseling is needed.
In a statement released to the news media, NRMLA President and CEO Peter Bell said, “The report raises valid questions and we look forward to a continuing dialogue with the CFPB to collaborate to find answers. All of us want seniors and their children to have a better and more widespread understanding of reverse mortgages. That is the intent of our Borrow with Confidence consumer education reachout, a comprehensive effort to provide tools that will create the utmost transparency and clear understanding of the reverse mortgage process.”
The CFPB is adding more information to its web site and creating an informational pamphlet for interested consumers. The Bureau will be publishing a notice in the Federal Register seeking detailed information from the public on the factors that influence reverse mortgage consumers’ decision-making, consumers’ use of reverse mortgage loan proceeds, longer-term consumer outcomes of a decision to obtain a reverse mortgage, and differences in market dynamics and business practices among the broker, correspondent, and retail channels for reverse mortgages.
NRMLA plans to do a webinar early next month to provide members with our assessment of the key findings and to explain the implications the study has for the industry. The report’s findings include:
1) The tools – including federally required disclosures – available to consumers to help them understand prices and risks are insufficient to ensure that consumers are making good tradeoffs and decisions.
2) Nearly half of all borrowers in FY 2011 were under 70. If these individuals deplete their home equity too soon, they may find themselves without the financial resources to finance a future move – whether due to health or other reasons.
3) Funding for housing counseling is under pressure, making access to high-quality counseling more difficult. And because many counselors only get paid if the reverse mortgage closes, the CFPB feels this could undermine their impartiality.
Download draft Federal Register notice
Download Considering a Reverse Mortgage