CFPB Sues Reverse Mortgage Lender for Deceptive Advertising

As part of a sweeping review of 800 randomly selected mortgage-related advertisements across the country, the Consumer Financial Protection Bureau (CFPB) is suing reverse mortgage lender All Financial Services for allegedly conducting illegal advertising activities.

Additionally, the bureau is ordering “forward” lenders Flagship Financial Group and American Preferred Lending to end their false advertising, after all three lenders have been targeted for misleading consumers with advertisements implying U.S. government approval of their products.

“Each of these companies has misled consumers with false advertising,” said CFPB Director Richard Cordray, in a statement. “The U.S. government is very serious about stopping companies from falsely claiming federal authority, and we are particularly concerned about false or deceptive statements made in advertisements about reverse mortgages that target older Americans.”

Maryland-based All Financial Services — a mortgage broker and lender in Maryland, New Jersey, Pennsylvania and Washington, D.C. — has offered several kinds of mortgages, including reverse mortgages.

In the 12 months ending in November, the lender was tied for 61st nationally in reverse mortgage loan volume, according to data compiled by Reverse Market Insight (RMI). During that time, All Financial averaged eight reverse mortgage loans per month.

The CFPB alleges that from November 2011 to December 2012, All Financial Services used advertisements that were deceptive by misrepresenting that the source of the advertisements was, or was affiliated with, a governmental entity.

They also allegedly misrepresented that the Federal Housing Administration-insured reverse mortgage program was time-limited or had a deadline, the CFPB says.

For example, one mailer sent to nearly 200,000 consumers advertising All Financial Services’ reverse mortgages had an eagle resembling the Great Seal of the United States. The header read, “GOVERNMENT LENDING DIVISION” and “Housing and Recovery Act of 2008 Eligibility Notice.”

According to CFPB complaints, the reverse mortgage lender also falsely said that no monthly payments are required “whatsoever” under a reverse mortgage “as long as you and your spouse live in the home,” which is misleading for two reasons:

“First, homeowners who take out a reverse mortgage are still required to pay taxes and insurance,” the CFPB says. “Second, at the time the ads were disseminated, the reverse mortgages they advertised could be due upon the death of the last borrower, regardless of whether a non-borrowing spouse still lived in the home.”

The CFPB is filing a complaint in the United States District Court for the District of Maryland seeking a civil fine and a permanent injunction to prevent future violations.

Today’s three actions against reverse and forward lenders stem from a joint review conducted by the CFPB and the Federal Trade Commission of about 800 randomly selected mortgage-related ads across the country, including ads for reverse mortgages, mortgage loans and refinancing. The agencies looked at public-facing ads in newspapers, on the Internet and on mail solicitations, while some came from consumer complaints.

Written by Emily Study

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