Federal Trade Commission staff has filed comments with the Federal Financial Institutions Examination Council (FFIEC) supporting a measure designed to protect consumers from deceptive claims and to help them make better-informed decisions about whether to obtain a reverse mortgage. Reverse mortgages, typically available only to borrowers age 62 or older, allow them to “spend down” the equity in their home while they live there. A reverse mortgage is a home-secured loan that becomes due when the homeowner moves, sells the home, dies, or fails to meet loan terms such as paying property tax or homeowners insurance. Although reverse mortgages have assisted many elderly consumers in drawing on the equity in their homes, some consumers may not fully understand these complex products or may be deceived by advertising claims made about them.
In December 2009, the FFIEC issued proposed guidance for its members on how to deal with reverse mortgages. FFIEC members include the federal banking agencies – Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of Thrift Supervision, National Credit Union Administration – and the State Liaison Committee, which includes representatives from the Conference of State Bank Supervisors, American Council of State Savings Supervisors, and National Association of State Credit Union Supervisors.
The comments announced today, prepared by the staff of the FTC’s Bureaus of Consumer Protection and Economics and its Office of Policy Planning, describe FTC work in this area, including forming a federal-state working group to strengthen law enforcement efforts against illegal practices. The comments also note FTC consumer and business education efforts, such as including a revised consumer brochure, “Reverse Mortgages: Get the Facts Before Cashing in on Your Home’s Equity,” a new business alert to help housing counselors spot and report potentially deceptive claims, and presentations to reverse mortgage industry groups.
FTC staff specifically supports the FFIEC’s efforts to advise lenders of the importance of not making deceptive claims for reverse mortgages and to provide them with concrete guidance as to the circumstances under which claims may be deceptive in violation of Section 5 of the FTC Act. The comments also encourage reverse mortgage lenders and brokers under the FTC’s jurisdiction to review and consider the proposed guidance’s advice and examples relating to deceptive claims. The comments further note the value of testing disclosures and other measures in certain circumstances to confirm that they are clear and useful and do not create unintended consequences.