Marketing Compliance

Words to Watch

Below are some of the more recent developments in reverse mortgage advertising. These are only guidelines and in most circumstances there is a simple way to avoid the issue by just changing a few words (e.g. never use “government backed” always used “government insured”) or adding a small explanation. The Government Accountability Office’s reverse mortgage report identified six claims that they found to be misleading. They include:
  • “Never owe more than the value of your home”: The claim is potentially misleading because a borrower or heirs of a borrower would owe the full loan balance—even if it were greater than the value of the house—if the borrower or heirs chose to keep the house when the loan became due. This was the most common of the potentially misleading statements we found in the marketing materials we reviewed. This claim was made by HUD itself in its instructions to approved HECM lenders; however, in December 2008, HUD issued guidance to HECM lenders explaining the inaccuracy of this claim.
  • Implications that the reverse mortgage is a “government benefit” or otherwise, not a loan: While HECMs are government-insured, the product is a loan that borrowers or their heirs must repay, not a benefit. Examples of this type of claim include the following: “You may be qualified for this government-sponsored benefit program,” and “Access the equity in your home without having to sell, move, or take out a loan.”
  • “Lifetime income” or “Can’t outlive loan”: Although borrowers can choose to receive HECM funds as monthly tenure payments, even under this option, payments will not continue once the loan comes due (e.g., when the borrower moves out of the house or violates other conditions of the mortgage).
  • “Never lose your home”: This claim is potentially misleading because a lender could foreclose on a HECM borrower’s home if the borrower did not pay property taxes and hazard insurance or did not maintain the house.
  • Misrepresenting government affiliation: An example of this type of claim would include use of government symbols or logos and claims that imply that the lender is a government agency.
  • Claims of time and geographic limits: These claims falsely imply that HECM loans are limited to a certain geographic area, or that the consumer must respond within a certain time to qualify for the loan. Examples include “must call within 72 hours,” and “deadline extended,” as well as the claim that a consumer’s residence is “located in a Federal Housing Authority qualifying area.”
NRLMA conducted a session at their San Diego conference entitled “Acceptable Advertising – and the Language You Must Avoid.” NRMLA President, Peter Bell, pointed out repeatedly that Democrat Senator Claire McCaskill is the source behind much of today’s troublesome reverse mortgage legislation. McCaskill got involved after her mother received marketing material from a reverse mortgage company informing her that she was eligible for a new government program. The committee expressed concern over the following statements:
  • “Eliminate your current mortgage debt payment” – Mortgage debt is not eliminated by a reverse mortgage, only postponed.
  • “Make no payments during your lifetime” – This makes borrowers think that they do not have tax and insurance obligations, which they still must pay during their lifetime.
  • “Tax free” – The panel advised against using this phrase, as loan officers are not tax specialists and are not licensed to give tax advice. Furthermore, a reverse mortgage is only tax free at certain points, depending on how the funds are dispersed.
  • “Stay in your home as long as you live” – This is only true if the terms of the reverse mortgage are complied with.
  • “Your heirs will inherit all remaining equity”
  • “The lender cannot take or own your home” – If a borrower defaults on a reverse mortgage, the lender can take the home.
  • “NO income or credit requirements to qualify.”

NRMLA issued an opinion letter outlining additional areas of concern. This is the pertinent part of the advisory:

No Cost

It has been reported to NRMLA that some reverse mortgage lenders are touting some reverse mortgage programs as “no cost loans.” While lenders may be waiving origination fees, paying borrowers closing costs and even paying for some or all of the up‐front FHA mortgage insurance premium due to the FHA (which sums may more usually be paid by the borrower), reverse mortgage loans, nevertheless, are not cost free, due to the obligation to repay interest, among others.
As further described below, such claims of “no cost” also may violate several provisions of federal and state law, and federal regulatory guidance with respect to reverse mortgage marketing in that such claims can be and often are misleading if not downright false, and typically do not present fair and balanced information regarding reverse mortgages.

Accordingly, it is also a violation of the NRMLA Code of Ethics for a NRMLA Member, directly or indirectly, to state or imply in its advertising or marketing to seniors or others that reverse mortgage loans either are “no cost” loans or “require no payments,” or that seniors need not repay a reverse mortgage “during their lifetime” or that a senior “cannot lose” or that there is “no risk” to a senior’s home with a reverse mortgage loan, at least without also explaining, in an equally prominent and conspicuous manner in such advertising or marketing, that Reverse Mortgage loans do require seniors to make certain specified payments and meet other specified obligations.

Testimonials

NRMLA Ethics Advisory Opinion 2008‐1 already provides that it is a violation of the NRMLA Code of Ethics for a NRMLA Member to provide or arrange for a testimonial or endorsement or infomercial that fails clearly to disclose the nature of the relationship (including, if applicable, that a payment has been made as part of the relationship) between the NRMLA Member and the person or entity providing the testimonial or endorsement or infomercial.

"Stimulus" Money, Call to Action, Sense of Urgency

Accordingly, it is also a violation of the NRMLA Code of Ethics for a NRMLA Member, directly or indirectly, to state or imply in its advertising or marketing to seniors or others, that “recent” federal legislation or HUD action provides more money for seniors, if such legislation or action, if any, is not recent, or if such funds have not been appropriated for seniors, especially if coupled with a sense of urgency or call to action stating or implying that if the senior does not promptly respond, he or she may or will lose or miss out on this or related “limited” opportunities.

Use of Celebrities

It is also a violation to directly or indirectly, to use a celebrity’s image or likeness without that person’s express, written and documented permission, or to provide celebrity endorsements that do not reflect the honest opinions, findings, beliefs, or experiences of the endorsers. Further, an endorsement may not convey any express or implied representation that would be unfair, misleading or deceptive if made directly by the NRMLA Member.

Simulated Checks & Currency

Accordingly, it is also a violation of the NRMLA Code of Ethics for a NRMLA Member, directly or indirectly, to include as part of its advertising or marketing to seniors or others, simulated checks or currency.

Pre-approved or Pre-qualified loans

Accordingly, it is also a violation of the NRMLA Code of Ethics for a NRMLA Member, directly or indirectly, to state or imply in its advertising or marketing to seniors or others that an applicant or borrower is “pre‐approved” or “pre‐qualified” for a reverse mortgage loan without also fully and clearly disclosing approval or qualification conditions or other criteria that apply.

Use of HUD logo

Accordingly, it is a violation of the NRMLA Code of Ethics for a NRMLA Member, directly or indirectly, to use the names or logos of the U. S. Department of Housing and Urban Development (“HUD”) or Federal Housing Administration (“FHA”), or names or logos confusingly similar in appearance, in its advertising or marketing of reverse mortgages to seniors or others, except as otherwise expressly may be permitted under applicable law.