Some marketing ideas sound pretty good in theory. But in practice, they do not always come across the way the creator intended. Many reverse mortgage marketing pieces also probably sound good in concept, but there are regular examples of “good intentions gone bad.”
Unfortunately, these attempts at promoting reverse mortgages ultimately damage the image of our industry and are counterproductive to our efforts to educate the public about this wonderful retirement planning tool.
Some time ago I was browsing through my daily Google Alerts, a ritual where I read the various articles published that day mentioning reverse mortgages. I remember a time, not so long ago, when an article on reverse mortgages was a rarity, often resulting in a great deal of excitement and discussion. Multiple copies of the article, clipped from real paper newspapers (the Internet was in its infancy), would be forwarded to my attention by colleagues, friends and family members. These articles more often than not contained many inaccuracies and misperceptions.
Today, articles mentioning reverse mortgages are commonplace. When reviewing my daily alerts, the first thing I look for in an article is whether the article is positive or negative in nature. Secondly, I review the article for accuracy. Over the past several years we have certainly had our bumps and bruises as a result of articles highlighting old news or extolling the perceived nefarious traits, rather than the virtues, of reverse mortgages. In addition to reviewing these articles, I am often presented with examples of borderline reverse mortgage marketing pieces that have made their way into the public domain.
As co-chair of NRMLA’s Standards and Ethics Committee, I review questionable practices, whether in the form of advertising, business practices, or general ethics issues. The committee evaluates each complaint from an ethics standpoint as it relates to the NRMLA Code of Ethics and Professional Responsibility. We work with our regulators to address the issues in both a proactive and reactive manner.
The vast majority of reverse mortgage advertisements are done in a professional, thoughtful manner and represent reverse mortgages accurately, portraying our industry in a manner that is beneficial to all industry participants. These advertisements clearly indicate they are a solicitation for reverse mortgages; the product descriptions are accurate and are designed to generate interest from those who may truly benefit from a reverse mortgage.
Anytime you are developing a marketing plan, one of the biggest challenges is maximizing the return on your investment, or ROI. Oftentimes, particularly with print media, space is an issue. All advertisers should be mindful of federal and state licensing and disclosure requirements, in addition to guidance issued by NRMLA in the form of Ethics Advisories.
NRMLA’s first Ethics Advisory, Ethics Advisory Opinion 2008-01: Ethical Advertising, was released in February 2008. This advisory provided guidance to NRMLA’s membership regarding acceptable advertising practices and highlighted some key examples of practices that could be considered false, misleading, deceptive or unfair. These practices were labeled collectively as “Unethical Advertising.”
Included in this advisory was a list of six specific examples of unethical advertising, which were again supplemented by last year’s supplemental advisory, NRMLA Ethics Advisory Opinion 2010-2, Additional Ethical Advertising Practice Requirements. Advisory Opinion 2010-2 includes additional guidance to NRMLA members, describing an additional six specific acts and practices that were deemed violations of the NRMLA Code of Ethics and Professional Responsibility because they can be construed as unethical advertising practices .
In all, we have 12 examples provided by NRMLA. Please note that this list is not all-inclusive; rather, these are specific examples of issues deemed particularly troubling and damaging to our industry’s reputation and in direct violation of NRMLA’s Code of Ethics and Professional Responsibility.
Below is a brief summary of the 12 examples of practices that are in violation of the NRMLA Code of Ethics (please refer to the NRMLA website for additional detail):
1.Marketing or advertising HECM loans as a “Government Benefit” or as “Government Supported”; from or offered by a “Government Loan Division” or “Official Business”; or as “Endorsed” or “Approved” by the Government, Federal Government, HUD, FHA, AARP or by NRMLA;
2.Stating or suggesting that failure to respond to its marketing or advertising will or may result in a loss to the consumer of any benefit to which the consumer is or may be entitled;
3.Making misleading, unfair or exaggerated claims of benefits to consumers;
4.Providing or arranging for a testimonial, endorsement or infomercial that fails to clearly disclose the nature of the relationship between the NRMLA member and the person or entity providing the testimonial, endorsement or infomercial;
5.Requiring or suggesting that a product or service other than the reverse mortgage must be purchased in order to obtain the reverse mortgage loan;
6.Marketing or advertising to a business partner unreasonably high compensation in a manner that is false and/or misleading;
7.Directly or ¬indirectly stating or implying that reverse mortgage loans are “no cost” loans, that they “require no payments,” that seniors need not repay a reverse mortgage “during their lifetime,” that a senior “cannot lose” or that there is “no risk” to a senior’s home with a reverse mortgage loan, at a minimum, without at least explaining that reverse mortgage loans do, in fact, require seniors to make certain specified payments and meet other specified obligations;
8.Using a celebrity’s image or likeness without that person’s express, written and documented permission, or to provide celebrity endorsements that do not reflect the honest opinions, findings, beliefs or experiences of the endorsers;
9.Stating or implying that an applicant or borrower is “pre-approved” or “pre-qualified” for a reverse mortgage without also fully disclosing approval or qualification conditions or other criteria that apply;
10.Stating or implying that “recent” federal legislation or HUD action provides more money for seniors, if such legislation or action, if any, is not recent or if such funds have not been appropriated for seniors, particularly if the claim is made with a sense of urgency or call to action implying that if the senior does not promptly respond they may miss out on this or related “limited” opportunities;
11.Including simulated checks or other currency as part of an advertising or marketing piece; or
12.Using the names or logos of HUD, FHA or other names or logos confusingly similar in appearance except as otherwise permitted by law.
The above-referenced advisories were issued in response to claims by regulators and the media that reverse mortgage industry participants were actively engaged in unethical advertising practices. While many argue such practices are the exception, not the rule, the fact is that there were (and still are) organizations actively involved in unethical advertising on a regular basis. The advisories, with the full support of NRMLA’s Board of Directors, were created to provide clear guidance to industry participants in an effort to curtail unethical advertising and marketing practices.
It is important to note that the vast majority of reverse mortgage advertising is done in a thoughtful manner, managing to both comply with federal and state requirements, adhering to the spirit of the NRMLA Code of Ethics and Professional Responsibility while also succeeding in generating acceptable response rates and ROI to the marketer. There are some terrific examples of claims that manage to pique the reader’s interest while still accurately describing our product. Here are a few examples:
1.Reduced upfront cost HECMs (instead of “no cost” HECMs)
2.Make no monthly mortgage payments (instead of “no payments”). In this case, it’s helpful to footnote the claim with an indication that borrowers are still required to make property tax and homeowner’s insurance payments)
3.No repayment required for as long as you live in the home as your primary residence and remain current on property charges (versus “during your lifetime”)
4.FHA-insured (rather than claiming the product is a “government benefit”)
The above examples demonstrate the following point: It is possible to describe reverse mortgage features and benefits accurately while still serving the purpose of capturing the interest of the reader. Please keep in mind that these suggestions are for illustration purposes only. Advertisers should always consult with their company’s counsel and/or compliance specialists to ensure they are in full compliance with applicable regulatory requirements.
One topic I have often commented on is that it is difficult to enforce good taste and common sense. You, the reader, probably know what I am referring to – there are regular instances where organizations in our industry walk a fine line of compliance, enter gray areas and push the limits of acceptability. It is easy to enforce instances of clear violations of the law and related regulations; however, it is always difficult to address poor taste.
Some advertisements, whether they are in print media, on television or on the Internet, are simply a result of poor judgment. Do we want to be ranked up there with the Chia Pet ads or the various infomercials that inevitably end with a “But wait! There’s MORE!”? I, for one, do not. Every time an advertisement is designed, we must keep in mind that we are not only trying to generate the best possible ROI, but are also shouldering a certain amount of responsibility for the public’s perception of reverse mortgages, both as a product and as a viable retirement planning tool.
Although we have addressed celebrity spokespeople in our Ethics Advisories, there is absolutely nothing wrong with a celebrity promoting reverse mortgages. In fact, these campaigns have provided great benefit to the reverse mortgage industry through increasing awareness and acceptance of the product. They have also generated good business for companies who opt to go this route. They key, however, is for the scripts to be written in a manner where the “pitch” doesn’t sound so “pitchy.” Ultimately the advertiser is going to look at response and conversion rates versus content and settle on what works best for them.
I’ve seen mailers appearing to be correspondence from a government organization, referring to reverse mortgages as a government benefit or entitlement program. Others have simulated checks or vouchers attached to form letters, and yet others are modeled after the home loan modification mailers sent out by various entities trying to take advantage of the misfortune of so many homeowners in today’s marketplace. Some are clear violations of NRMLA’s Code of Ethics and Professional Responsibility, as well as federal and state Laws. This is what led to the Ethics Committee’s decision to issue the Ethics Advisories outlined above – we need to proactively educate our industry about unacceptable advertising practices, and this is of critical importance to ensure the ongoing viability of our product. The difficulty has been reaching the group of non-NRMLA lenders and originators, and the Ethics Committee has begun considering various ideas on how we can work with wholesalers to ensure even non-members are well-versed in what may or may not be considered acceptable advertising practices.
There are examples of advertising practices that are not necessarily clear violations of any regulation or code. In my mind, these advertisements are classified in what I prefer to call “the Land of Poor Taste.” I have often thought a “Wall of Shame” could be useful – an industry participants-only Internet site where we publish examples of the dos and don’ts of reverse mortgage marketing. Perhaps we will be able to create something along these lines. Meanwhile, organizations should step back and re-evaluate their marketing initiatives from an outsider’s perspective, always asking themselves, “Is this the way we want our company and our industry perceived?”
We cannot be the poor-taste police. However, if we all do our part, we can avoid public displays of poor judgment in reverse mortgage marketing.