ADS Study: Reverse mortgage ADS confuse consumers

Ads for reverse mortgages contain confusing, incomplete and inaccurate statements that can pose serious risks to older Americans, results of a new federal study showed Thursday.

 The ads, which market a financial product typically targeted at seniors and often feature celebrity spokespeople, can "jeopardize retirement security if not used carefully," the study by the Consumer Financial Protection Bureau warned.
Reverse mortgages are complex loans that enable homeowners aged 62 and older to supplement their income by borrowing against the accrued equity in their dwellings. Repayment is usually deferred until the borrower dies, moves out of the home or sells it.
Reverse mortgage loans today comprise approximately 1% of the traditional U.S. mortgage market, with roughly 628,000 loans outstanding, the CFPB said, citing industry reports.
The study found that some of the dozens of seniors from three U.S. cities who viewed or read reverse mortgage ads as part of CFPB focus groups didn't realize the loans would have to be repaid in the future. Others said that mentions of Washington housing agencies or graphics featuring eagles and official seals left the mistaken impression that reverse mortgages were provided by the federal government.
Some of the ads shown to the focus groups "used incomplete or inaccurate language implying that borrowers cannot lose their homes, or that borrowers make no monthly payments," the study found.
Approximately half of the 97 reverse mortgage ads the CFPB said appeared in five large urban U.S. markets between March 2013 and March 2014 included "fine print" that addressed tax and insurance requirements, repayment terms and other important financial details.
But most of the older consumers in the focus groups "could not read the fine print in printed ads," the CFPB study found. Additionally, none of the consumers were able to read the fine print in televised versions of the ads.
Many of focus groups said the ads typically showed seniors playing golf, riding bicycles or pursuing other leisure activities. The depictions left the impression the ads "promoted living a good lifestyle while being young enough to enjoy it," or suggested traveling while younger seniors "still have their health," the study found.
However the CFPB study warned that obtaining a reverse mortgage at age 62 can be risky because "there is an increased likelihood that younger borrowers ... will outlive their loan funds," an outcome that may be less likely for older borrowers.
The findings raise concerns about marketing of reverse mortgages, loans that a 2011 USA TODAY report found have not saved seniors from defaulting on their taxes and homeowners insurance payments and potentially losing their homes to foreclosure.
"As older consumers consider reverse mortgage loans to tap into their home equity, they need to be careful of those late-night TV ads that seem too good to be true," said CFPB Director Richard Cordray. "It is important that advertisements do not downplay the terms and risks of reverse mortgages or confuse prospective buyers."
The National Reverse Mortgage Lenders Association shares consumers' concerns that all advertising should be accurate and has a code of professional responsibility with guidance for ethical advertising, said Peter Bell, the industry group's president.
The CFPB findings were based on input from consumers aged 62 or older who owned a home and had more than 50% equity in their primary residence. All had heard of but had never had a reverse mortgage, and each said they knew little or nothing about such loans.
Fifty nine participants took part in all, with 48 viewing or reading the ads in focus groups and 11 providing feedback in one-on-one interviews, the CFPB said.
The study findings build on a June 2012 report to Congress in which the consumer agency provided a broad overview of reverse mortgages.