Comments to CFPB Highlight Borrower Experiences

NRMLA submitted comments to the Consumer Financial Protection Bureau last week in response to a Federal Register notice published over the summer that asked a series of questions about the real-life experiences of reverse mortgage borrowers.

The association retained ORC International of Princeton, New Jersey, to conduct a poll of existing borrowers to help answer the questions.

“The reputation of reverse mortgages is too often based upon personal conjecture, anecdotes and unsubstantiated opinion rather than factual evidence and data,” says Peter Bell, President and CEO of NRMLA. “The CFPB has been given huge responsibilities and we want them to have the facts about actual borrowers as they consider reverse mortgages and any possible future actions.”

Following is a summary of the key findings:

Factors that influence reverse mortgage customers’ decision-making

  • Seniors are deliberate and careful in exploring the possibility of getting a reverse mortgage
  • They do not depend on industry professionals’ recommendations but seek additional advice and education from knowledgeable and trusted advisors
  • Better shopping by potential borrowers seems to be a trend.
  • Choice of products is complex and involves many factors.
  • The reasons for selecting fixed rate or adjustable rate are also complex and involve many factors.
  • One prevalent factor is a general historical preference for fixed rates, particularly among older Americans.

Consumer use of reverse mortgage proceeds

  • Borrowers are primarily using proceeds to remain in their home to age in place
  • Elimination of mortgage and other non-housing debts is a key to aging in place
  • What they need to age in place has been influenced by a number of factors, including the recession and its results
  • There are many indications in our research that funds are being used judiciously and purposefully. There are other options for seniors but in many cases, moving may not be a viable or desirable one.
    Longer term outcomes for reverse mortgage borrowers
  • There are currently a larger percentage of younger borrowers than in the past, but we do not yet have a history to know the results of this
  • Will they use it wisely to extend the life of their cash supply as advocated by the academic researchers?
  • We need to observe this as it evolves
  • The flexibility of uses is a positive feature of this product
  • More research on using home equity to help retirees is driving professional financial advisors to advise consumers at an earlier age about appropriately using reverse mortgages to help age in place and supplement cash flow.

The differences in market dynamics and business practices among the broker, correspondent and retail channels

  • All loan originator channels are compensated in the same manner
  • Companies that perform more functions receive a higher fraction of the total compensation attached to a loan
  • Loan officer compensation rules have put broker companies at a disadvantage
  • The mix of different channels creates a competitive market and increases options for consumers.