CFPB Fines Three Reverse Mortgage Lenders For Alleged False Advertising

Posted by Patrick Barnard on December 07, 2016 No Comments

The Consumer Financial Protection Bureau (CFPB) is fining three reverse mortgage lenders – American Advisors Group, Reverse Mortgage Solutions and Aegean Financial – for allegedly using deceptive advertising to promote their reverse mortgage offerings.

In addition to paying fines, the lenders have been ordered to cease their deceptive advertising practices and implement systems to ensure they are complying with all regulations.

“These companies tricked consumers into believing they could not lose their homes with a reverse mortgage,” Richard Cordray, director of the CFPB, says in a release. “All mortgage brokers and lenders need to abide by federal advertising disclosure requirements in promoting their products.”

The CFPB points out that the Mortgage Acts and Practices Advertising Rule prohibits misleading claims in mortgage advertising.

In addition, the Dodd-Frank Wall Street Reform and Consumer Protection Act prohibits institutions from engaging in deceptive acts or practices, including practices regarding advertising of consumer financial products or services.

Orange, Calif.- based American Advisors Group – which the bureau says is the largest reverse mortgage lender in the U.S. – is accused of misinforming consumers through its ads that reverse mortgage borrowers could not lose their homes and would have the right to stay in their homes for the rest of their lives. The false information was included in television advertisements, as well as in an “information kit” that the lender sent to approximately 1 million consumers.

Through its investigation, the CFPB found that American Advisors Group had been using false advertising since January 2012. The company also falsely told potential customers that they would have no monthly payments and that with a reverse mortgage, they would be able to pay off all debts.

American Advisors Group will pay a civil penalty of $400,000 for the alleged violations. In addition, it must make clear and prominent disclosures in its reverse mortgage advertisements and implement a system to ensure it is following all laws.

Reverse Mortgage Solutions, headquartered in Houston and licensed to conduct business in 48 states, faces a similar complaint. The CFPB says in addition to telling consumers that they could not lose their homes, Reverse Mortgage Solutions also falsely told potential customers that they would have no payments with a reverse mortgage and that they would “always retain ownership” and “can’t be forced to leave.” The company also misrepresented that heirs would inherit the home, without disclosing any conditions of the inheritance, the CFPB says.

What’s more, Reverse Mortgage Solutions created a false sense of urgency to buy its reverse mortgage product by telling consumers that it was only available for a limited period of time. For example, one call script required representatives to tell potential customers that if they didn’t call back by close of business, they would “turn your file down, and you will miss out on a tremendous money-saving opportunity.”

Reverse Mortgage Solutions will pay a civil penalty of $325,000 and has also been ordered to provide clear and prominent disclosures in its reverse mortgage advertisements, as well as to implement a system to ensure it is following all laws.

Regional lender Aegean Financial, headquartered in El Segundo, Calif., which also operates under multiple names in California, Louisiana, Oregon, Texas and Washington, is also accused of telling consumers that they could not lose their homes. It also falsely told potential customers through its ads that they would have no payments with a reverse mortgage and would not be subject to costs associated with refinancing a reverse mortgage.

Aegean Financial is also accused of falsely affiliating itself with the government in its Spanish-language advertisements. For example, one advertisement said, “If you are 62 years old or older and you own a house, we have good news for you: You qualify for a reverse mortgage from the United States Housing Department.” The company also failed to keep records of its advertisements, as required by law.

Aegean Financial will pay a civil penalty of $65,000 and also must make clear and prominent disclosures in its reverse mortgage advertisements, as well as implement a system to ensure it is following all laws, the CFPB says in its release, which can be found here.

Register here to receive our Latest Headlines email newsletter




Leave a Comment