Appraisals and ValuationsMortgageRegulatoryReverse

CFPB settles with reverse lender over “deceptive” home estimates

American Advisors Group would pay $1.3 million in civil redress and penalties

The Consumer Financial Protection Bureau (CFPB) today settled a lawsuit against the nation’s largest reverse mortgage lender for allegedly sending consumers inflated home valuations.

In a lawsuit filed today in the U.S. District Court of California’s Central District, the CFPB alleged that Irvine, California-based American Advisors Group (AAG) sent borrowers deceptive and inflated home estimates in direct mailers to convince consumers to take out a reverse mortgage. The direct mailers advertised a prominent “estimated home value,” per the court filing, which the CFPB claimed was inflated.

The agency does not explain how it determined the values were inflated, nor does it offer documentation to explain how it calculated the difference between the allegedly inflated values and the accurate values. Per the lawsuit, the midpoint of those values were inflated on average by 18%, while at the high end, the values were an average 28% higher.

The CFPB said that while the lender included a footnote in its marketing materials claiming it made “every attempt to ensure the home value information provided is reliable,” those efforts were insufficient.

AAG performed “no analysis directly related to the estimated home values that it advertised in its mailers,” the watchdog agency claimed.

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The CFPB also alleged that AAG violated a consent order in 2016, which prohibited the lender from violating the consumer financial protection act until December 2021.

“American Advisors Group violated consumers’ trust by advertising reverse mortgages with inflated and deceptive home-value estimates,” said David Uejio, the CFPB’s acting director. “The CFPB will act decisively when we uncover consumer harm or practices that seek to take advantage of vulnerable populations.”

A spokesperson for AAG said that the third-party home value estimates on the mailers were “not always accurate,” and said that the company cooperated fully with the investigation and had taken steps to address the CFPB’s concerns.

“AAG is built on its core values of being caring, driven and ethical,” the spokesperson said. “We take these types of marketing issues seriously, and are committed to providing our customers with clear and accurate information to help them responsibly access their home equity.”

As part of a proposed settlement, the lender would pay $1.3 million in civil redress and civil penalties. AAG would also have to stop advertising the allegedly inflated estimated home values to consumers, and would have to refer its customers to certain CFPB materials on reverse mortgages.

Reverse mortgages allow borrowers to receive a loan based on equity they have in their home, either in a lump sum or in monthly installments. The loan is repaid when the borrower sells their house or dies.

How much financing borrowers – who must be 62 or older – can receive from a reverse mortgage, as with forward mortgages, depends on the value of the home.  The larger the valuation, the more a consumer can potentially borrow. Interest and fees are added to the loan balance each month.

The CFPB has significantly ramped up its enforcement activities under the Biden administration. Under its recently confirmed director, Rohit Chopra, who is expected to take office on Monday, the agency is expected to further increase its fair lending supervision.

Those actions may soon come into sharper focus. In a semi-annual report, released today, the CFPB said it had “a number of ongoing and newly opened fair lending investigations of institutions.”

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