A trio of reverse mortgage companies has agreed to settle allegations that they misled prospective borrowers with deceptive advertising.
American Advisors Group, Reverse Mortgage Solutions and Aegean Financial are all marketers of reverse mortgage products.
Reverse Market Insight reports that AAG is the biggest home-equity conversion mortgage lender with 9,703 HECMs endorsed this year.
RMS/Security One Lending landed in the sixth spot with 2,143 HECMs endorsed during the 11 months ended Nov. 30.
An announcement Wednesday from the Consumer Financial Protection Bureau indicates that
all three companies have agreed to consent orders resolving alleged actions.
According to the bureau,
all three companies have advertised since 2012 that consumers could not lose their homes with a reverse mortgage.
But reverse mortgage borrowers can lose their homes if they fail to pay their property taxes, homeowners insurance or property maintenance costs.
They also falsely claimed borrowers would have no payments despite
the non-mortgage expenses they would have.
As a result, the companies violated the
Mortgage Acts and Practices Advertising Rule and the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Orange, California-based AAG’s consent order requires it to pay a $400,000 civil penalty, make clear and prominent disclosures in its advertisements and implement a system to ensure it is following all laws.
“The company ran television advertisements almost daily and disseminated its information kit to approximately 1 million consumers,” the CFPB stated. “The information kit included a DVD and several brochures with information about reverse mortgage products.”
Houston-based RMS reportedly ran advertisements on television, radio and the Internet. It also advertised through direct mail and in print. It allegedly misrepresented that heirs would inherit the home even though heirs frequently are not able to keep the home after the borrower’s death. It additionally said customers would eliminate all debt even though they would still have the reverse mortgage debt.
“The company also created a false sense of urgency to buy the reverse mortgage product and misrepresented that time limits constrained the availability of a reverse mortgage,” the regulator said. “For example, one call script required representatives to tell potential customers that if they didn’t call back by close of business, they would ‘turn your file down and you will miss out on a tremendous money-saving opportunity.'”
Terms of RMS’ consent order are similar to AAG’s except that its civil penalty amount is $325,000.
Aegean Financial, which is based in El Segundo, California, markets its products through print, direct mail, radio and the Internet.
In addition to misrepresenting that consumers could not lose their homes and that they would have no payments, the CFPB claims that it told prospects they would not be subject to costs associated with refinancing a reverse mortgage even though they would incur costs — including credit report fees, flood certification fees, title insurance costs, appraisal costs and other closing costs.
Aegean Financial advertises reverse mortgages to Spanish-speaking consumers. The bureau said it falsely affiliated itself with the government in these ads.
Aegean Financial’s consent order requires it to not imply affiliation with the government, make clear and prominent disclosures in its advertisements, implement a system to ensure it is following all laws, and maintain complete and accurate records. Its civil penalty will cost $65,000.
