The Consumer Financial Protection Bureau on Wednesday filed consent orders against three reverse mortgage companies, accusing them of deceptive advertising and misrepresentations.
The companies all claimed in various ads that reverse mortgage borrowers could eliminate debt, make no monthly payments and live in their homes for the rest of their lives.
“These companies tricked consumers into believing they could not lose their homes with a reverse mortgage,” CFPB Director Richard Cordray said in a press release. “All mortgage brokers and lenders need to abide by federal advertising disclosure requirements in promoting their products.”
The companies each agreed to pay civil money penalties and to clearly and prominently disclose the fact that reverse mortgage borrowers must comply with a loan’s terms, including paying property taxes, homeowner’s insurance and maintenance.
American Advisors Group, the largest reverse mortgage lender in the U.S., agreed to a civil money penalty of $400,000.
Reza Jahangiri, the CEO of American Advisors in Orange, Calif., said in an email: “We take our regulatory responsibilities seriously and have made a significant investment in our compliance and legal infrastructure to ensure we fully conform to all marketing laws and rules — and better understand how they are interpreted.”
Reverse Mortgage Solutions, in Houston, agreed to pay $325,000. The CFPB also alleged that the company told borrowers their heirs would inherit the home, which can only happen by repaying the reverse mortgage or paying 95% of the assessed value of the home. Marc Helm, the former president and CEO of Reverse Mortgage Solutions, did not return calls seeking comment.
Aegean Financial, in El Segundo, Calif., agreed to pay $65,000. The CFPB also alleged that Aegean claimed a government affiliation when it advertised under the name Jubilados Financial to Spanish-speaking borrowers in California. The company also failed to keep records of some of its ads. Chris Jastrzebski, the company’s president, did not return a call seeking comment.
Because reverse mortgages are complex, the CFPB has long warned of the dangers associated with misleading and deceptive advertising.