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Mortgages

Mortgage closing can be complicated: Navid’s story

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Imagine you’re about to close on a home. You’ve spent months calculating costs, comparing home prices, researching neighborhoods, and you’ve finally found a house you love and can afford. But after making a deposit, you find out that your loan is not approved and the lender is keeping your money.

That’s what happened to Navid and his wife.

“All of these things were new to us,” Navid said. In a very short period of time, we lost $12,000.”

Navid tried to contact the lender but was getting nowhere. With no help in sight, he assumed his money was lost forever until he found out about the CFPB.

“One night we were watching the Daily Show with Jon Stewart and the director of the Consumer Financial Protection Bureau was the guest,” Navid remembered. “He talked about this organization and what they do.”

After the show, he decided to submit a complaint and soon after, the couple received a full refund and a formal apology from the mortgage company.

“I came to [the] United States because I thought this is a country [where] there are rules and regulations, and the government is for the people. This is why I chose this country,” Navid said. He added that it’s a wonderful feeling to know that there are parts of the government that are trying to reach out and help people.

We know that buying a home can be complicated, and that’s why we’ve created tools to help home buyers understand and shop for mortgages. We’re glad that Navid and his wife got the help they needed, and we’re here for you, too! To share your experience or learn more from others, visit us at consumerfinance.gov/yourstory.

Consumer advisory: Don’t be misled by reverse mortgage advertising

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Reverse Mortgage Ads photo

You might see enticing images of youthful retirees on the golf course or enjoying other leisure activities in a reverse mortgage advertisement. A reverse mortgage is a special type of loan that allows homeowners 62 and older to borrow against the accrued equity in their homes. The loan must be paid back when the borrower dies, moves, or no longer lives in the home.

Ads for reverse mortgages are found on television, radio, in print, and on the internet, and many ads feature celebrity spokespeople discussing the benefits of reverse mortgages without mentioning risks. We looked closely at many ads and found incomplete and inaccurate statements used to describe the loans. In addition, most of the important loan requirements were often buried in fine print if they were even mentioned at all. These advertisements may leave older homeowners with the false impression that reverse mortgage loans are a risk-free solution to financial gaps in retirement.

In conducting our study, we met with older homeowners in Washington DC, Chicago, and Los Angeles to learn about their thoughts and impressions of reverse mortgage ads. After looking at a variety of ads, many homeowners we spoke to didn’t realize reverse mortgage loans need to be repaid. Instead, some thought they could access their equity interest-free, or that the federal government provided the money as a benefit to seniors. Homeowners told us that the most attractive messages in the ads were “you can live in your home as long as you want,” and that you “still own your home.” Many ads, however, didn’t mention that seniors could lose their homes if they don’t satisfy the loan requirements, such as paying property taxes or homeowners insurance.

Seniors said the ads made reverse mortgages look like a good way to travel and enjoy retirement while they were still young and active. Yet Americans are living longer, more active lives than ever before. Reverse mortgage borrowers can outlive their loan funds by borrowing without careful planning.

Reverse mortgage ads don’t always tell the whole story, so consider these facts when you see advertisements:

1. A reverse mortgage is a home loan, not a government benefit

Reverse mortgages have fees and compounding interest that must be repaid, just like other home loans. With most reverse mortgages, federal insurance guarantees that borrowers will receive their loan funds if their lender has financial difficulty or if their loan balance exceeds the value of their home. However, borrowers pay for this insurance and it’s not a government benefit.

2. You can lose your home with a reverse mortgage

When a reverse mortgage ad says you’ll retain ownership of your home, or that you can live there as long as you want to, don’t take these messages at face value. These statements are true only if you continue to meet all requirements of the reverse mortgage. If you fall behind on your property taxes or homeowners insurance, are absent from your home for longer than six months, or fail to satisfy other requirements, you can trigger a loan default. If you don’t take care of the default in time, the lender can foreclose on your home. Sometimes these requirements are listed in fine print, but not always. If you have a question about reverse mortgage requirements, contact a HUD-approved housing counselor near you.

3. Without a good plan, you could outlive your loan money

After seeing a reverse mortgage ad, you might think that a reverse mortgage guarantees your financial security no matter how long you live. Americans are living longer today than they were just a generation ago. Make sure you have a financial plan in place that accounts for a long life. That way if you need to tap your home equity, you won’t do it too early and risk running out of retirement resources later in life.

If you have a problem with your reverse mortgage

Check out Ask CFPB to learn more about reverse mortgages. You can also download a printer-friendly version of this information to share with friends or clients.

If you’re having a problem with your reverse mortgage or having problems getting through to your mortgage servicer, you can submit a complaint to us online or by calling (855) 411-2372 or TTY/TDD (855) 729- 2372. We’ll forward your complaint to the company and work to get you a response within 15 days.

For more information about how reverse mortgages work and questions to ask, read our guide to reverse mortgages for older consumers and their families. Do you or a loved one have a reverse mortgage loan? Here are three steps you should take.

Know Before You Owe: You’ll get 3 days to review your mortgage closing documents

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Later this year, the Know Before You Owe mortgage rule goes into effect. One of the important requirements of the rule means that you’ll receive your new, easier-to-use closing document, the Closing Disclosure, three business days before closing. This will give you more time to understand your mortgage terms and costs, so that you know before you owe.

Giving you three business days to review your Closing Disclosure before you sign on the dotted line is designed to protect you from surprises at the closing table. It also gives you time to consult with your lawyer or housing counselor and ask all the questions you might have about the terms of your mortgage.

Will the new mortgage disclosures delay my closing?

The answer is no for just about everybody. Here’s a factsheet to clarify some questions about the three day review period.

If there is a change to any one of three, very specific, and very important items, the lender must give you another three business days to review the updated disclosure.

The only three changes that would require a new three-day review period:

However, many things can change in the days leading up to closing that won’t require a new three-day review period, including typos on the forms, problems discovered on a walk-through, and most changes to payments made at closing, including changes that require seller credits.

Implementing the rule

We also delivered a letter to Members of Congress stating that our oversight of the implementation of the Know Before You Owe mortgage rule (also known as the TILA-RESPA Integrated Disclosure rule) will be sensitive to the progress made by those entities that have been squarely focused on making good-faith efforts to come into compliance with the rule on time. We have spoken with our fellow regulators to clarify this approach. This is consistent with our approach in the implementation of the Title XIV mortgage rules .

Over the last couple of years, we’ve taken many steps, including publishing guides, templates, and webinars, to support industry implementation of the Know Before You Owe mortgage rule so that lenders and financial institutions can effectively comply with the rule. Learn more about our work to make the mortgage process easier to navigate for consumers and the resources available to lenders and financial institutions.

Updated on July 6, 2015: We proposed a new effective date of October 3, 2015 for the Know Before You Owe disclosure rule.

Income from the Section 8 Housing Choice Voucher Homeownership Program shouldn’t mean you don’t qualify for a mortgage

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201505_cfpb_section-8-housing-choice-voucher-homeownership-program
Did you know that it’s illegal for creditors to discriminate against you because you receive public assistance income? Today, we’re releasing a bulletin to remind mortgage lenders not to discriminate against applicants because their income includes vouchers from the Section 8 Housing Choice Voucher (HCV) Homeownership program.

How the program works

The Section 8 HCV Homeownership Program helps low-income consumers buy their first homes. The program is funded by the U.S. Department of Housing and Urban Development and administered by participating local Public Housing Authorities. If you’re eligible for the program, it can provide you with monthly payments to help cover homeownership expenses.

What the law says

Under the Equal Credit Opportunity Act (ECOA), it’s against the law for a creditor to discriminate against applicants because of income from public assistance. Excluding or refusing to consider these vouchers as a source of income categorically, or accepting the vouchers only for certain types of mortgage loans, may violate ECOA and its implementing regulation, Regulation B.

Everyone deserves to qualify based on their income

Everyone should be able to qualify for mortgages they can afford based on their stable income. Our reminder to mortgage lenders should help people who receive Section 8 HCV Homeownership Program vouchers receive fair and equal access to credit.

Submit a complaint

If you believe a lender has discriminated against you for any reason, you can submit a complaint online or call (855) 411 2372. We can assist people in over 180 languages. We’ll forward your issue to the company and work to get you a response, generally within 15 days.

To learn more about the factors lenders consider when deciding to lend money, visit Ask CFPB.

The VA doesn’t send you mortgage ads

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We’re announcing an enforcement action against a lender that wrongfully used the logos of the Department of Veterans Affairs (VA) and the Federal Housing Administration (FHA). RMK Financial Corporation (also doing business as Majestic Home Loans) sent out ads to veterans and other VA-eligible borrowers that misled consumers to think that RMK’s products were endorsed by the VA, or even sent by the VA, and they misrepresented the terms and costs of the mortgages themselves. This is the fifth enforcement action we’ve completed in the past two months against companies using deceptive mortgage advertising.

Deceptive advertising to mislead consumers

RMK sent out mailings to over 100,000 consumers across the country. These ads used the name, seal, and logos of the VA, giving the impression that the VA had sent the ad or endorsed the product. Also, the ads misrepresented the price of the advertised mortgages, including whether the interest rate was fixed or variable. Sometimes, important disclosures about loan rates were hidden on the back of the ads or buried in fine print. Envelopes were plastered with warnings about “fines or imprisonment” under US law.

Two years ago, along with the Federal Trade Commission, we warned companies that were placing mortgage ads directed at consumers, some of which targeted those eligible for VA benefits. Since then, we’ve continued to investigate mortgage lenders, including RMK.

The VA won’t advertise to you

Mike Frueh, Director of the VA Home Loan Program, had this to say about mortgage offers that represent themselves as coming from the VA:

“VA will never email or mail out solicitations for our loan program. VA does not endorse or sponsor any particular lender; instead, we work to ensure all Veterans and Servicemembers can safely use the benefit they’ve earned, at the lender of their choice. If you have any questions about your home loan benefit, please visit the VA website, or call VA at (877) 827-3702.”

Here’s what you can do

While we may not reduce the volume of your junk mail as a result of today’s action, we hope that we’ve called attention to a significant problem. Here’s how you can avoid being taken in by similar offers:

  • Be a savvy consumer— look at everything an advertiser has to say about the product they’re selling. Today’s action involved a mortgage lender that placed flashy seals and logos front and center, but hid important disclosures in the fine print on the back of their ads.
  • Get information from trusted sources — even if an ad is plastered in official-looking seals and impressive endorsements, check with a trusted source to learn all you can about the product being advertised. Learn more about VA loans and refinances. Ask CFPB also has answers to some common questions.
  • Let us know about misleading ads— if you see an ad that looks deceptive or misleading, or just looks too good to be true, submit a complaint to us. We accept complaints about mortgages and other financial products marketed to veterans, such as consumer loans. Information you provide informs our work every day.

Consumer advisory: Three steps you should take if you have a reverse mortgage

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Infographic on reverse mortgages
Reverse mortgages are a type of loan that allows homeowners, 62 and older, to borrow against the accrued equity in their homes. Reverse mortgages can help some older homeowners meet financial needs in retirement. Most reverse mortgages today are federally insured through the Federal Housing Authority’s (FHA) Home Equity Conversion Mortgage (HECM) program.

We’ve heard many complaints from consumers who have experienced problems with reverse mortgages. The most common reverse mortgage complaint is about difficulty with changing the loan terms and problems communicating with loan servicers. Some consumers, for example, express frustration about slow, inconsistent communication from their reverse mortgage loan servicer.

We’ve also heard from consumers regarding non-borrowing spouses who are facing the loss of their home after the borrowing spouse has died. Recent changes to the federal program that insures most reverse mortgages allows some non-borrowing spouses to remain in the home after the death of the borrower spouse for HECM loans originated after August 4, 2014. Since this change is not retroactive, spouses of reverse mortgage borrowers who took out their loan prior to August 4, 2014 could be more likely to face losing the home when the borrower dies.

3 things you or your loved ones should do if you have a reverse mortgage

1. Verify who is on the loan

If you took out a reverse mortgage with two borrowers, check with your reverse mortgage servicer to make sure its loan records are accurate. Call your servicer to find out what names are listed on your loan. They may be able to help you over the phone. See your reverse mortgage statement for the phone number, and ask them to send you this information in writing for your records. You can also write a letter requesting information.

2. If your reverse mortgage is in the name of only one spouse, make a plan for the non-borrowing spouse

If your reverse mortgage is in the name of only one spouse, contact your loan servicer to find out if the non-borrowing spouse may qualify for a repayment deferral. A repayment deferral allows a non-borrowing spouse to remain living in the home after the death of the borrowing spouse. If not, make a plan in the event the borrowing spouse dies first and the loan becomes due. If you or your spouse are not on the loan but believe that you should be, promptly seek legal advice.

If you have enough remaining equity in your home, you could consider taking out a new reverse mortgage with both spouses. You’ll have to pay loan fees again, however, for the new loan. If the non-borrowing spouse can’t pay off the reverse mortgage when the borrowing spouse passes away, he or she might consider a new traditional mortgage if they have the income and credit to qualify. Also consider other family members that would be willing to cosign on such a loan. Some surviving spouses may need to sell the home and make plans for where they will live after the home is sold. Contact a HUD-approved housing counselor counselor near you to explore your options.

3. Talk to your children and heirs – make a plan for any non-borrower family members living in the home

Make sure your adult children or any family members living in the home know what to expect when your reverse mortgage comes due. If they wish to keep the home, contact your reverse mortgage company for written information that explains their options. Discuss this information with your family and follow up with the reverse mortgage company for anything you don’t understand.

Have a problem with your reverse mortgage?

If you’re having a problem with your reverse mortgage or having problems getting through to your mortgage servicer, you can submit a complaint online or by calling (855) 411-2372 or TTY/TDD (855) 729- 2372. We’ll forward your complaint to the company and work to get you a response within 15 days.

For more information about how reverse mortgages works and questions to ask, read our guide to reverse mortgages for older consumers and their families.

Check out Ask CFPB to learn more about reverse mortgages.