The CFPB has issued a “Snapshot of reverse mortgage complaints” covering complaints submitted to the CFPB from December 2011 (when the CFPB began accepting consumer complaints on reverse mortgages) through December 2014.
According to the report, the CFPB handled approximately 1200 reverse mortgage complaints during that period. The issues those complaints involved and the percentage of such complaints that dealt with each such issue were as follows: problems when unable to pay (38%), making payments (32%), applying for the loan (18%), signing the agreement (10%) and receiving a credit offer (3%).
The CFPB states that the complaints indicate “confusion and frustration over the terms and requirements of reverse mortgages.” For example, the CFPB found that many consumers were frustrated when they could not refinance their loans due to insufficient equity. In the CFPB’s view, these complaints suggest homeowners may not understand that the loan proceeds and accrued interest on the loan over time will substantially decrease the amount of available equity. Among the other issues as to which the CFPB found consumer confusion were the ability to obtain loan changes, such as adding additional borrowers to extend the loan term, and the consequences of a reverse mortgage borrower’s death on non-borrower family members living in the home at the time of the borrower’s death.
The complaints also involved loan servicing problems such as: difficulty paying off a reverse mortgage that had become due and payable; failure by the servicer to keep accurate records; and unresponsiveness by the servicer when a borrower was attempting to prevent foreclosure.
The CFPB concludes the report with the comment that “[a]s the likelihood increases that older Americans will use their home equity to supplement their retirement income, it is essential that the terms, conditions and servicing of reverse mortgages be fair and transparent so that consumers can make informed decisions regarding their options.” While the CFPB has posted a new consumer advisory on its website to address some of the concerns raised by the complaints, this concluding comment suggests the CFPB is also likely to consider imposing additional disclosure and other requirements on reverse mortgages.