Submission Number: 00009
Commenter: D Coe
Agency: Federal Trade Commission
Initiative: Mortgage Acts and Practices - Advertising Rule
Attachments: No Attachments
I agree with many of the proposed regulations. Consumers need advertising to be thorough and explain the loan terms clearly. One possible area I see that could be better clearer in their advertising is in reverse mortgages. I have seen advertising in this area that seems unclear at best. These loans can be more confusing due to there being no monthly payment and especially when it includes an interest rate that fluctuates. What happens to the interest due and how it is to paid back in very unclear. The few seniors I have had contact with that were considering this type of loan, didn't seem to have a good understanding of how the money would be repaid - it just seemed like free money to them. An example of the type of advertising I am referring to can be found on www.reverseutah.com under their FAQ section. Here their website states:
Question: "I have a $200,000 home. If I get a reverse mortgage and spend $50,000 then pass away, does the bank then get my house? [Answer] No. Your estate would sell the house for $200,000. The estate would pay the bank $50,000; the other $150,000 goes to your heirs."
Although I am not a loan officer and have no personal experience with reverse mortgages, the answer to this FAQ seems deceptive in that the interest owed on the $50,000 borrowed and spent by the senior is not addressed at all. It goes against any reason that the full $150,000 remaining would all go to the heirs in the above referenced example.
The other change I would add is to require any mortgage company to correctly represent in their advertising what name they are licensed under and what state. Going back to the above referenced website, www.reverseutah.com, there are two companies named on this website, but a search of licensed mortgage companies in Utah does not show either company as a licensed mortgage company in the state and no other names of individuals or companies are given.