WASHINGTON, D.C.– Today the Consumer FinancialProtection Bureau (CFPB) took action against three reverse mortgagecompanies for deceptive advertisements, including claiming thatconsumers could not lose their homes. The CFPB is ordering AmericanAdvisors Group, Reverse Mortgage Solutions, and Aegean Financial tocease deceptive advertising practices, implement systems to ensurethey are complying with all laws, and pay penalties.
“These companies tricked consumers into believing they could notlose their homes with a reverse mortgage,” said CFPB DirectorRichard Cordray. “All mortgage brokers and lenders need to abide byfederal advertising disclosure requirements in promoting theirproducts.”
A reverse mortgage is a special type of home loan that allowshomeowners who are 62 or older to access the equity they have builtup in their homes and defer payment of the loan until they passaway, sell, or move out. The loan proceeds are generally providedto the borrowers as lump-sum payments, monthly payments, or aslines of credit. Homeowners remain responsible for payment oftaxes, insurance and home maintenance, among other obligations.
The Mortgage Acts and Practices Advertising Rule prohibitsmisleading claims in mortgage advertising. In addition, theDodd-Frank Wall Street Reform and Consumer Protection Act prohibitsinstitutions from engaging in deceptive acts or practices,including with regard to advertising of consumer financial productsor services.
American Advisors Group
American Advisors Group, headquartered in Orange, Calif., islicensed in 49 states and the District of Columbia. It is thelargest reverse mortgage lender in the United States. The companyran television advertisements almost daily and disseminated itsinformation kit to approximately 1 million consumers. Theinformation kit included a DVD and several brochures withinformation about reverse mortgage products.
Through its investigation, the CFPB found that since January2012 American Advisors Group’s advertisements misrepresented thatconsumers could not lose their home and that they would have theright to stay in their home for the rest of their lives. Thecompany also falsely told potential customers that they would haveno monthly payments and that with a reverse mortgage they would beable to pay off all debts. In fact, consumers with a reversemortgage still have payments and can default and lose their home ifthey fail to comply with the loan terms. These terms require, amongother things, paying property taxes, making homeowner’s insurancepayments, and paying for property maintenance. Moreover, a reversemortgage is a debt and therefore cannot be used to eliminate all ofa consumer’s debt.
Under the terms of today’s consent order, the company must makeclear and prominent disclosures in its reverse mortgageadvertisements and implement a system to ensure it is following alllaws. It will also pay a civil penalty of $400,000.
What are two things EACH of the above companies did that wasdeemed deceptive?
