Protect Seniors from Predatory Lending
- by: Consumers Union
- recipient: Consumer Financial Protection Bureau
Reverse mortgages are home loans that enable homeowners who are 62 or older to obtain cash by borrowing against the equity in their home. What most people don't realize is that these loans can rapidly deplete the home's equity.
The Consumer Financial Protection Bureau (CFPB) could help protect these seniors by enforcing a system to protect borrowers from predatory lending.
Reverse mortgages may be appropriate for some seniors, but reverse mortgages should be considered as a last resort.
Many seniors actually end up financially unstable as a result of these mortgages. Almost 10% of all reverse mortgage loans are currently in default. More borrowers are taking loans at earlier ages, which means that after exhausting their home equity, they have no resources to fall back on.
Sign now to demand the CFPB create a system to protect vulnerable seniors from predatory lending.
The Consumer Financial Protection Bureau (CFPB) could help protect these seniors by enforcing a system to protect borrowers from predatory lending.
Reverse mortgages may be appropriate for some seniors, but reverse mortgages should be considered as a last resort.
Many seniors actually end up financially unstable as a result of these mortgages. Almost 10% of all reverse mortgage loans are currently in default. More borrowers are taking loans at earlier ages, which means that after exhausting their home equity, they have no resources to fall back on.
Sign now to demand the CFPB create a system to protect vulnerable seniors from predatory lending.
I am very concerned about predatory lenders manipulating seniors with limited resources, driving them into debt, and putting their homes at risk.
I strongly recommend that you take the following steps to protect seniors who have or are eligible for a reverse mortgage:
- Ensure that loans are suitable for borrowers: Lenders and brokers should be required to tell potential borrowers if there are more appropriate and less costly alternatives available to the borrower, determine whether the borrower understands the complex nature of the contract, and not make a reverse mortgage that places the senior at greater risk of losing their home.
- Establish a fiduciary responsibility for the loan: Lenders and brokers must be required to act in the best interests of the borrower and should be held liable for violating this fiduciary duty.
- Outlaw deceptive marketing: The CFPB should investigate marketing practices by "lead generators" who may be misleading seniors into providing information to sell to loan originators and brokers and prohibit practices by lenders and brokers that mislead seniors about the nature and risks of a reverse mortgage.
- Adopt stronger prohibitions on cross promotions: Prohibitions against cross promotions of other financial products by lenders and brokers should extend to non-HUD-insured loans. Insurance agents and brokers should be held liable for selling an annuity or other financial product or service when it is purchased with reverse mortgage funds.
- Strengthen the quality and content of counseling: HUD counselors should be required to hold an in-person session with prospective borrowers to determine whether a reverse mortgage is suitable for the borrower. The counselor should deny a counseling certificate to the borrower if the loan is not in the best interest of the senior.
- Protect non-borrowing spouses and tenants: Spouses and tenants whose names are not on the reverse mortgage loan should be notified about their limited rights to remain in the home after the borrower dies or permanently moves out.
Sign PetitionSign PetitionI strongly recommend that you take the following steps to protect seniors who have or are eligible for a reverse mortgage:
- Ensure that loans are suitable for borrowers: Lenders and brokers should be required to tell potential borrowers if there are more appropriate and less costly alternatives available to the borrower, determine whether the borrower understands the complex nature of the contract, and not make a reverse mortgage that places the senior at greater risk of losing their home.
- Establish a fiduciary responsibility for the loan: Lenders and brokers must be required to act in the best interests of the borrower and should be held liable for violating this fiduciary duty.
- Outlaw deceptive marketing: The CFPB should investigate marketing practices by "lead generators" who may be misleading seniors into providing information to sell to loan originators and brokers and prohibit practices by lenders and brokers that mislead seniors about the nature and risks of a reverse mortgage.
- Adopt stronger prohibitions on cross promotions: Prohibitions against cross promotions of other financial products by lenders and brokers should extend to non-HUD-insured loans. Insurance agents and brokers should be held liable for selling an annuity or other financial product or service when it is purchased with reverse mortgage funds.
- Strengthen the quality and content of counseling: HUD counselors should be required to hold an in-person session with prospective borrowers to determine whether a reverse mortgage is suitable for the borrower. The counselor should deny a counseling certificate to the borrower if the loan is not in the best interest of the senior.
- Protect non-borrowing spouses and tenants: Spouses and tenants whose names are not on the reverse mortgage loan should be notified about their limited rights to remain in the home after the borrower dies or permanently moves out.
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