The Consumer Financial Protection Bureau (CFPB) today took action against Nationwide Equities Corporation for sending deceptive loan advertisements to hundreds of thousands of older borrowers. The Bureau found that advertisements from Nationwide Equities misled consumers about how much money they could receive from a reverse mortgage, the fees and costs associated with the products, and the consequences of nonpayment. The advertisements violated the Mortgage Acts and Practices Advertising Rule (MAP Rule), the Truth in Lending Act (TILA), and the Consumer Financial Protection Act of 2010 (CFPA). The CFPB is ordering the company to pay a penalty, cease its illegal conduct, and implement a compliance plan to affirmatively review every advertisement to ensure they do not violate federal law.
“Nationwide Equities misled borrowers into believing they could not lose their homes with a reverse mortgage,” said CFPB Acting Director Dave Uejio. “Reverse mortgages are complicated financial obligations that require careful consideration. Today’s action underscores the Bureau’s commitment to helping protect older homeowners from unscrupulous companies.”
Nationwide Equities is a mortgage broker and direct lender that offers and originates reverse mortgage loans, primarily home equity conversion mortgage loans and private jumbo reverse mortgage loans. The company, headquartered in Mahwah, New Jersey, is one of the largest reverse mortgage lenders in the United States, is licensed in 17 states and the District of Columbia, and operates three retail branches across the country.
A reverse mortgage is a special type of home loan that allows homeowners who are 62 or older to access the equity they have built up in their homes and defer payment of the loan until they pass away, sell, or move out. The loan proceeds are generally provided to the borrowers as lump-sum payments, monthly payments, or as lines of credit. Homeowners remain responsible for payment of taxes, insurance and home maintenance, among other obligations.
The MAP Rule prohibits misleading claims in mortgage advertising. The TILA requires accurate disclosures of the terms and costs of consumer loans. In addition, the Dodd-Frank Wall Street Reform and Consumer Protection Act prohibits institutions from violating Federal consumer financial laws, including with regard to advertising of consumer financial products or services under the MAP Rule and TILA.
Deceiving Consumers About the Costs and Risks of Reverse Mortgages
The Bureau found that Nationwide Equities sent potential customers advertisements that were deceptive and illegal. The advertisements and letters included:
- Hidden costs: The advertisements misrepresented the costs of the reverse mortgages Nationwide Equities offered, including the fees it charged for the loans, as well as the associated taxes and insurance.
- Hidden risks: Nationwide Equities hid the fact that borrowers must continue to pay taxes and insurance or risk losing their home.
- False existing relationship: Letters sent by Nationwide Equities made it appear that the consumer already had an existing relationship with the lender.
- False Pre-approvals: Nationwide Equities told consumers they were pre-approved for specific loan amounts when they were not and misrepresented the potential savings from refinancing consumers’ existing reverse mortgages.
The CFPB found that Nationwide Equities had multiple MAP Rule violations by misrepresenting the:
- Fees, costs, or payments;
- Taxes and insurance;
- Potential for default and right to reside in the dwelling;
- Association of the product or provider, or source of the communications;
- Available cash or credit; and
- Likelihood to obtain a particular term or refinancing.
The advertisements violated the MAP Rule, the TILA and the CFPA.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has the authority to take action against institutions violating federal consumer financial laws, including by engaging in unfair, deceptive, or abusive acts or practices. The consent order requires Nationwide Equities to:
- Stop sending deceptive advertisements: Nationwide Equities must immediately cease all illegal advertising practices.
- Implement a compliance plan: The company must develop and implement a system to ensure all future advertising templates are affirmatively reviewed for compliance with federal consumer financial law.
- Pay a civil penalty: The order also imposes a penalty of $140,000 to be paid to the Bureau and deposited in the CFPB’s Civil Penalty Fund.