CFPB says Reverse Mortgages Confuse Seniors, But Fails to Talk to Borrowers

A reverse mortgage study released by the Consumer Financial Protection Bureau last week concluded that seniors were confused by the products.

“Our study finds that reverse mortgages are complex products that are difficult for consumers to understand,” writes Megan Thibos, an author of a recent Consumer Financial Protection Bureau study on reverse mortgages, on the agency’s blog. A strong statement from a government agency, but troubling considering the CFPB failed to speak with any consumers as part of its research prior to publishing the 200-plus page report.

“We did not conduct a direct to consumer survey,” said a CFPB official during an industry stakeholder conference call, which was recorded and later obtained by RMD. “[The report] was a very large undertaking as it was, to add a direct to consumer survey would’ve added months to the process.”

After the report was published, media outlets ran with headlines such as More Red Flags on Reverse Mortgages and Gov’t Watchdog: Reverse Mortgages Confuse Elderly, reporting on the conclusion that the agency had found borrower confusion in its study.

The implications of such headlines are far reaching as consumers pick up their morning paper or log in to read about the confusion reverse mortgages are causing.

For an industry that has been continuously battling misinformed reports, to have such reports based on a government study that failed to speak with consumers directly is disappointing to the say the least.

As a journalist who covers reverse mortgages every day, I tip my hat for the research that was conducted and the depth of the report, which presents thorough look into the market.

The Bureau did speak with 30 individuals from 15 companies during its research including lenders, brokers, Ginnie Mae issuers, servicers, consultants and capital market traders, according to the report.

It also looked to consumer submissions to the CFPB as well as complaints submitted to the Federal Trade Commission and consumer narratives, which it used to gain insight into seniors’ understanding.

To its credit, the agency is now requesting detailed information from the public on the factors that influence reverse mortgage consumers’ decision-making and how the product is used.

The Bureau hopes consumers will participate and provide both positive and negative personal experiences, but I can’t imagine all that many will participate, given the complexity of the comment process, which involves visiting the CFPB’s website regularly enough to know about the requests or checking out the Federal register.

Maybe I’m wrong, but unless consumers are reading the CFPB’s website on a daily basis—like we are—it’s highly unlikely it will generate many comments from the people who actually use the product.

We also have to wonder why the CFPB didn’t seek more information from the studies out there that are available. A recent National Reverse Mortgage Lenders Association commissioned study found that 74% of those reverse mortgage borrowers surveyed described their reverse mortgage experience as positive.

It’s fair to be skeptical considering the NRMLA study comes from an industry association, but consumer advocates have also found consumers to be satisfied with their reverse mortgage.

A study published by AARP in 2007 found that 93% of borrowers surveyed said the loan had a mostly positive effect on their lives.

No one will argue with the CFPB’s mission: to protect consumers and in this case, older Americans. It’s something that the industry supports, everyone wants seniors to be well educated on the product.

But when the CFPB fails to speak with the consumers they’re looking to protect, it’s disappointing to me both as a journalist and an American.

Written by Elizabeth Ecker

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