COMBINED-Code of Ethics and Advisory Opinions 02132024

The Guidance focuses on ways an institution may provide adequate information about reverse mortgage products. Under the Guidance, institutions offering either HECMs or proprietary reverse mortgages are encouraged to develop clear and balanced product descriptions and make them available to consumers shopping for a mortgage. They should set forth a description of how disbursements can be received and include timely information to supplement the TILA and other disclosures. Promotional materials and product descriptions should include information about the costs, terms, features, and risks of reverse mortgage products. The Guidance noted that institutions should review advertisements and other marketing materials to ensure that important information is disclosed clearly and prominently. For example, institutions should review the prominence of marketing claims and any related clarifying statements to ensure that potential borrowers are not misled or deceived. Institutions also are responsible for ensuring that marketing materials do not provide misleading information about product features, loan terms, or product risks, or about the borrower’s obligations with respect to taxes, insurance, and home maintenance. The Guidance noted that consumers are not always adequately informed that reverse mortgages are loans that must be repaid (and not merely ways to access home equity). Some marketing material has prominently stated that the consumer is not incurring a mortgage, even though the fine print states otherwise. The Guidance noted that some advertisements stated that reverse mortgage borrowers have no risk of losing their homes or are guaranteed to retain ownership of their homes for life. These advertisements did not clearly indicate the circumstances in which the reverse mortgage becomes immediately due and payable or in which borrowers may lose their homes. Advertisements that are potentially misleading include “income for life,” “you’ll never owe more than the value of your home,” “no payments ever,” and “no risk.” The Guidance noted that institutions offering reverse mortgages should clearly advise consumers about the consumers’ obligation to make direct payments for taxes and insurance. The Guidance also noted misrepresentations that reverse mortgages constitute “government benefits” or a “government program,” with no explanation that the products are loans made by private entities and that the only government program for reverse mortgages is the federally‐insured HECM program. State‐specific Examples of Policy and Guidelines Pennsylvania On July 10, 2010, the Pennsylvania Department of Banking issued a Statements of Policy on Reverse Mortgages. 40 Pa.B. 3869. The purpose of the Statement of Policy is to provide guidance to mortgage licensees regarding the Department's interpretation of the proper conduct of making, originating or servicing reverse mortgage loans and to inform licensees of the proper use of, and risks associated with, reverse mortgage loans. 38

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