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The CFPB gave little ground in its pledge Wednesday to be "sensitive" to lenders that make a "good-faith effort" to comply with new mortgage disclosure rules that go into effect in August. The agency's statements fell short of a formal grace period that the industry and lawmakers had been demanding.
June 3 -
The U.S. Postal Service strongly criticized a recommendation from its inspector general that the agency expand remittances, check cashing and other banking services. The services would be potentially riskier and costlier than the impression left by IG David Williams' report, the USPS said.
June 3 -
Bank of America has been sued by military veterans who say the bank charged them excessive interest rates while they served in Iraq, the Triangle Business Journal reported.
June 4
The Consumer Financial Protection Bureau issued a consumer advisory on Thursday warning older consumers about misleading advertisements promoting reverse mortgages.
The agency's advisory accompanied a study released the same day that found that consumers had trouble understanding reverse mortgages, and that the ads were often misleading and did not provide key information.
In particular, the advisory clarified that reverse mortgages are still home loans and not some form of a government benefit. The study found that some consumers did not learn from the ads they were shown that reverse mortgages carried fees and compounding interest, or that they were unaffiliated with the government. Others didn't even know that the loans had to be repaid.
"The ads left the consumers believing that if they purchase a reverse mortgage loan, they will be able to rest assured that they can live in their homes and enjoy financial security for the rest of their lives," CFPB Director Richard Cordray said during a press call on the study. "But a reverse mortgage does not carry such guarantees."
Exacerbating this issue, the study found, was the tendency for these ads to hide key information, such as interest rates, in the fine print or to leave out the information entirely. The study also found that the ads gave a false sense of reliability because many used celebrity endorsements, including one that even featured a former member of Congress.
(The report does not name the lawmaker, but former Sen. Fred Thompson is prominently featured in ads for AAG Reverse Mortgage. Henry Winkler, an actor known for his portrayal of The Fonz on "Happy Days," is featured in ads for One Reverse Mortgage.)
The advisory also addressed the false sense of financial security that some consumers in the study felt after learning about reverse mortgages through advertisements. The ads did not typically reiterate that homeowners must still pay for property taxes, insurance and maintenance if they take out a reverse mortgage.
The advisory warns consumers to ensure they have a plan as to how to use the money gained through a reverse mortgage to avoid outliving their funds or facing foreclosure.
The study interviewed roughly 60 individuals who were eligible for a reverse mortgage but knew little about them after showing them nearly 100 ads for the loans.
While the agency did disclose any plans to issue new rules regarding reverse mortgages, it has already begun to take enforcement actions against companies for misleading consumers about reverse mortgages.
In February, the CFPB sued reverse mortgage lender All Financial Services for deceptive advertisements. One of the lender's mail ads featured an eagle similar to the Great Seal of the United States and a header that said "Government Lending Division." At that time, the CFPB also ordered Flagship Financial Group and American Preferred Lending to cease with their advertising.
