The Consumer Financial Protection Bureau (CFPB) has released a report, "Reverse Mortgages: Report to Congress," that examines reverse mortgages and consumer protection concerns regarding reverse mortgages. In the report, the CFPB highlights several key findings, including:
►Reverse mortgages are complex products and difficult for consumers to understand;
►The loans are currently being used in ways different than they had been in the past, which increases the risk to consumers;
►Product features, market dynamics and industry practices also create risks for consumers;
►Consumer counseling needs to be improved; and
►Enforcement and regulation can be improved in areas such as cross-selling, fraud, advertising and disclosures.
The CFPB noted in the report that only about two to three percent of eligible homeowners currently have a reverse mortgage, and only about 70,000 new reverse mortgages are originated each year. But the agency went on to state that reverse mortgages have the potential to become a much more prominent part of the financial landscape in the coming decades.
“Reverse mortgages are complex and have the potential to become a much more pervasive product in the coming years as the baby boomer generation enters retirement,” said CFPB Director Richard Cordray in Reverse Mortgages: Report to Congress. “With one in ten reverse mortgages already in default, it is important that consumers understand what they are signing up for and that it is the right product for them.”
The CFPB was directed to study reverse mortgages as part of the Dodd-Frank Act. Dodd-Frank also authorizes the CFPB to issue regulations it determines necessary or appropriate as a result of the study. In carrying out this directive, the CFPB has also announced a Request for Information to gather public input on follow-up questions regarding reverse mortgages. Comments are due in 60 days.
