If you are over 62 and have equity in your home, a reverse mortgage can be a financial lifesaver. But if you misunderstand what you’re getting into, it can sink your ship. According to a recently concluded Consumer Financial Protection Bureau study, deceptive and ambiguous advertising is one reason many consumers don’t get the full picture.
The study found that American Advisors Group, Aegean Financial, and Reverse Mortgage Solutions used language that implies monthly payments are eliminated when you take out a reverse mortgage. That’s false: you still must pay taxes and insurance, or lose your home.
The CFPB also claims that Aegean Financial falsely told potential customers that there are no costs when refinancing a reverse mortgage, and that Reverse Mortgage Solutions gave consumers the impression that heirs can inherit the home (that’s possible only if heirs pay off the reverse mortgage or 95% of the home’s assessed value). Reverse Mortgage Solutions’ phone agents also reportedly pressured prospects, telling them they needed to act quickly or their file would be closed and their application denied.
American Advisors Group faces a fine of $400,000; Reverse Mortgage Solutions, $325,000; and Aegean Financial, $65,000.
I cannot stress enough the importance of understanding the financial realities behind the reverse mortgage so that you can make an informed decision. Please check out prior posts on this topic here and here.