In April 2021, for example, the CFPB ordered a reverse mortgage lender based in New Jersey to pay a $140,000 civil penalty because of direct-mail solicitations that the agency alleged violated the Mortgage Acts and Practices–Advertising (MAP) rule and Regulation Z, which implements the Truth in Lending Act, according to the CFPB website. “The Bureau found that advertisements from [this lender] misled consumers about how much money they could receive from a reverse mortgage, the fees and costs associated with the products, and the consequences of nonpayment,” according to a statement at the time. The lender misled borrowers into believing they could not lose their homes with a reverse mortgage, says Dave Uejio, CFPB acting director in early 2021, in a prepared statement at the time. “Reverse mortgages are complicated financial obligations that require careful consideration.” Wording and Details Matter Milano says NRMLA has been monitoring such missteps for decades, developing a list of issues—he and Schiffman call the list “The Dirty Dozen”—that reverse mortgage lenders should monitor, as well as best practices. By sticking to some basic guidance, companies can avoid pitfalls when it comes to advertising. (See sidebar to the right for the list of “The Dirty Dozen.”) “I used to have a rule of thumb on direct-mail advertising,” Milano says. “The more effective it was and the better the responses you got, the less compliant it was.” Milano says companies that follow the “Four P’s” can help ensure compliance: prominence, presentation, placement and proximity. Prominence means the advertising text and conditions are big enough to easily read, so it is best to avoid small print. Presentation means the advertisement is easy to understand. Placement means putting clarifying information where consumers are likely to seek information. And proximity means any qualifiers should be close to what is being qualified. “I think the lesson here for me of the Four P’s is that overall independent pieces of an ad—and I am thinking mailers or on a website—may have individual pieces that are perfectly compliant, but a regulator as a whole might take it as misleading,” he says. While the body of the text might be fine, the qualifications might not be. Or the advertisement buries important disclaimers on a back page in small print, he explains. ‘The Dirty Dozen’ Known as “The Dirty Dozen,” the following ethical issues are central to NRMLA’s guidelines on advertising included in its “Code of Ethics & Professional Responsibility.” Two advisory opinions from the Ethics Committee in 2008 and 2010 detailed several unethical marketing practices: 1. Presenting HECMs as a “government loan,” “government supported” or a “government benefit” or U.S. Department of Housing and Urban Development (HUD) or AARP approved; 2. Suggesting that a consumer’s failure to respond to marketing or advertising could lead to the loss of a benefit; 3. Benefits that are exaggerated without describing the related risks; 4. Using celebrity endorsers without express written consent or using celebrity endorsements that do not reflect the honest opinions, finding and experiences of the endorsers; 5. Advertising other products or services that must be purchased to obtain a reverse mortgage; 6. Advertising unreasonably high compensation to business partners from reverse mortgage proceeds; 7. Advertising reverse mortgages as “no cost” or similar wording, such as no fees, no risks, no expenses or that they do not require payments; 8. Providing or arranging for a testimonial or endorsement that fails to clearly disclose the nature of the relationship between the NRMLA member and person providing the testimonial or endorsement; 9. Advertising that consumers are “pre-approved” or “pre-qualified;” 10. Creating a false sense of urgency to act on a promotion; 11. Using simulated checks or currency; and 12. Using the logos or names for HUD or Federal Housing Administration in materials. Source: NRMLA Ethics Committee Advertising Rules continued on page 30 REVERSE MORTGAGE / SEPTEMBER–OCTOBER 2022 29
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