“As older consumers consider reverse mortgage loans to tap into their home equity, they need to be careful of those late night TV ads that seem too good to be true,” said CFPB Director Richard Cordray.
The reverse mortgage market is about 1% of the size of the traditional mortgage market, with 628,000 outstanding loans. Most reverse mortgages today are federally insured through the Federal Housing Authority’s Home Equity Conversion Mortgage program, which carry some regulatory requirements.
The CFPB study is based on 97 unique ads found on TV, radio, in print, and on the Internet, as well as interviews with 60 homeowners age 62 and older in Chicago, Los Angeles and Washington, D.C. The study found that the ads were characterized by:
- Ambiguity that reverse mortgages are loans
- False impressions about government affiliation
- Difficult-to-read fine print
- Celebrity endorsements that imply reliability and trust
- False impressions about financial security and staying in the home for the rest of the consumer’s life
The agency also issued an advisory warning to consumers.
Read the study.