Support for consumer protection, issues with enforcement
Dan Hultquist, a longtime industry educator, author and developer of REVERSE plus, emphasizes that members of the reverse mortgage industry support sufficient consumer protections and safeguards. Having these guardrails not only keeps consumers safe, but a strong protective presence allows more potential customers to trust the industry in what is often a delicate financial transaction.
“If they don’t trust us, it makes it really difficult for us to help them,” Hultquist said in an interview with RMD.
But the bureau has also clashed with the industry on occasion in ways that some participants have found unhelpful, despite doing what amounts to “very good things,” Hultquist said.
One of these good things is its maintenance of a consumer complaint database. This allows consumers to interact with data that can visualize the industries that are most affected by and responsive to their complaints.
“I do hope it continues under new leadership, so that we as an industry can address these issues and hold each other accountable,” Hultquist said. “I think it’s important to have a place where somebody can say they had a bad experience, and we can then make sure that doesn’t happen again.”
But Hultquist said a failure has been ineffective communication between private sector entities and the bureau, which goes both ways. Hultquist cited the publication of a CFPB report in 2015 that accused reverse mortgage advertising of being misleading.
He said the bureau never proactively communicated with the industry after that point about a sufficient path forward.
“What do we do about that? We need to be able to discuss issues and seek a solution rather than wait for subjective orders and arbitrary penalties,” Hultquist said. “And that’s, I think, where the industry was soured on the CFPB — when you don’t know what to expect until the orders and penalties are issued.
“I believe that to truly help the consumer, industry experts need to be able to discuss those things in an open forum.”
For its part, the National Reverse Mortgage Lenders Association (NRMLA) is taking a wait-and-see approach and expressing optimism that the bureau will maintain its function to protect older Americans.
“NRMLA and its members deal with a protected class of consumers, and we are hopeful that the bureau will keep a keen eye on protecting older Americans from financial fraud,” NRMLA President Steve Irwin told RMD. “We also hope that more efficient methods of promulgating rules are explored.”
Consequential regulatory body
But the difference the CFPB has made has also served to make the reverse mortgage industry stronger, according to Sarah Bolling Mancini, an attorney with the National Consumer Law Center (NCLC) who has subject matter expertise on the reverse mortgage industry and its products.
“One thing that comes to mind right away is [the CFPB has created] some really great explainer documents that are geared toward older adults who are considering getting a reverse mortgage,” she said. “They’ve created a booklet and some videos that are really easy to understand, and I think having a source of information from an independent agency that explained how this complex loan product works is really helpful toward making people trust the products.”
Mancini said these “very important” materials have the potential to help older adults considering a reverse mortgage to understand the pros and cons.
And some of the bureau’s enforcement actions, she said, have been beneficial in showing consumers that there is oversight to rein in problems.
“In their general oversight of mortgage lenders and mortgage servicers, they have helped to make sure that everybody’s playing within the rules, and that also instills greater trust in this product,” Mancini said. “And in this market, they have brought some enforcement actions against reverse mortgage lenders that were doing deceptive advertising and against servicers that were not communicating with borrowers properly.”
The bureau’s supervisory oversight of reverse mortgage servicers has only helped to strengthen the overall market, Mancini contends.
“[That’s] because they made it clear that if entities were not complying with the law, that was going to be detected, and it completely incentivized everyone to raise the game,” she said.
