Reverse mortgages can sound like a godsend for people in their golden years, but according to the Consumer Financial Protection Bureau, many promises some reverse mortgage companies make in their advertisements are not only empty -- they're downright false.
“These companies tricked consumers into believing they could not lose their homes with a reverse mortgage,” said CFPB Director Richard Cordray. “All mortgage brokers and lenders need to abide by federal advertising disclosure requirements in promoting their products.”
A reverse mortgage is a type of home loan for homeowners 62 or older which allows them to tap into their equity. The borrower doesn't have to pay back the loan until the home is sold or otherwise vacated. If the borrower dies, their spouse or estate would repay the loan.
The CFPB took action against three companies: American Advisors Group, Reverse Mortgage Solutions and Aegean Financial. All three were ordered to stop deceptive advertising, retool their systems to ensure they are complying with all laws and pay fines.
American Advisors Group was hit with the largest fine, ordered to pay $400,000 to the bureau. Reverse Mortgage Solutions must pay $325,000 and Aegean Financial, $65,000.