The report is entitled “A close look at reverse mortgage advertisements and consumer risks.” In conducting its study, the CFPB interviewed 59 homeowners age 62 and older in focus groups and in one-on-one interviews in Chicago, Los Angeles, and Washington, D.C. The consumers were shown reverse mortgage advertisements selected from 97 unique ads collected by the CFPB.
The CFPB found that after viewing the advertisements, consumers often misunderstood important loan features and the loans’ potential risks. The issues of greatest concern to the CFPB are:
- Many consumers did not understand that reverse mortgages are loans with fees, compounding interest and repayment terms unless an interest rate was explicitly stated in the advertisement.
- Advertisements may create the false impression that reverse mortgages are a risk-free government benefit, and not a loan.
- Consumers were confused by advertisement messages stating that they could remain in their homes indefinitely.
- Advertisements contributed to consumers not understanding that taking out a reverse mortgage too early can jeopardize financial security.
The CFPB’s consumer advisory, entitled “Don’t be misled by reverse mortgage advertising,” is intended to address these concerns by warning consumers about the false impressions that might result from reverse mortgage advertisements and highlighting facts consumers should consider when viewing such advertisements. The facts highlighted by the CFPB are that reverse mortgages are loans and not government benefits, can result in loss of a home if mortgage requirements are not met, and do not guarantee financial security no matter how long a consumer lives.
Advertisements targeting older Americans have been a continuing CFPB focus. In 2012, the CFPB sent warning letters to mortgage advertisers urging them to review their marketing materials to ensure that they complied with applicable law. Examples of the types of problems the CFPB identified in the ads included potential misleading statements about the costs of reverse mortgages.