The Consumer Financial Protection Bureau says the lender “misled borrowers into believing they couldn’t lose their homes on a reverse mortgage.”
The Consumer Financial Protection Office (CFPB) announced it will take action against Nationwide Equities Corp., a leading reverse mortgage lender with a presence in 38 states, for alleged misleading advertising.
The CFPB is imposing a $ 140,000 fine and urging Nationwide Equities to review its practices after alleging that the company has engaged in misleading practices in marketing its reverse mortgage product.
The office found that Nationwide Equities advertisements misled consumers about how much money they could get from a reverse mortgage, the fees and costs associated with the products, and the consequences of failing to pay.
“Nationwide Equities has misled borrowers into believing they couldn’t lose their homes on a reverse mortgage,” said Dave Uejio, acting director of the CFPB. “Reverse mortgages are complex financial obligations that require careful consideration. Today’s action underscores the Bureau’s commitment to protecting older homeowners from unscrupulous businesses. “
The advertisement violated the Mortgage Acts and Practices Advertising (MAP) rule, which prohibits misleading claims in mortgage advertising, the Truth in Lending Act, which requires detailed information about the terms and costs of consumer credit, and the Consumer Financial Protection Act by 2010. This prohibits institutions from violating federal consumer finance laws, including advertising financial products or services to consumers under the MAP Rule and TILA.
The CFPB is asking the company to pay a fine, cease its illegal behavior, and implement a compliance plan to review each advertisement to ensure it doesn’t violate federal law.
The Bureau found that Nationwide Equities was sending prospects advertisements that were misleading and illegal. The advertisements and letters contain:
Hidden costs: The advertisements misrepresented the cost of the Nationwide Equities reverse mortgages on offer, including the fees charged on the loans, taxes and insurance related thereto.
Hidden Risks: Nationwide Equities hid the fact that borrowers continue to pay taxes, insurance, or run the risk of losing their home.
Wrong existing relationship: Letters from Nationwide Equities suggested that the consumer already had a relationship with the lender.
Incorrect pre-approvals: Nationwide Equities notified consumers that they were pre-approved for certain loan amounts when they weren’t and misrepresented the potential savings from refinancing consumers’ existing reverse mortgages.
The CFPB found that the company had multiple violations of the MAP rules by misrepresenting fees, costs, or payments. Taxes and insurance; Potential for delay and right of residence in the apartment; Assignment of the product or provider or the source of the communication; available cash or balance; and probability of getting a certain term or refinancing.
For example, Nationwide Equities offered a loan “that allows senior homeowners to instantly increase their monthly cash flow tax-free” and “achieve their goals without affecting savings, investments or current income.”
In another solicitation, the lender claimed to have taken out a reverse mortgage loan “eliminating monthly mortgage payments” while allowing the borrower to “stay in your home” with “loan proceeds” [that] are tax free. “
In response to its findings, the CFPB issued a Consent order This requires that nationwide stocks:
Stop sending misleading advertisements: Nationwide Equities must immediately cease all illegal advertising practices.
Implement a compliance plan: The company must develop and implement a system to ensure that all future advertising templates are positively screened for compliance with federal consumer finance law.
Pay a civil fine: The order also provides for a US $ 140,000 fine to be paid to the Bureau and deposited in the CFPB’s Civil Penalty Fund.
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