Skip to main content

Understanding reverse mortgages

Today, we released a Report to Congress on reverse mortgages.

The Dodd-Frank Act, which created the CFPB, specifically recognized the unique financial needs of older Americans. Our Office of Older Americans is dedicated to protecting this population. In that effort we have taken a special look at one financial product only sold to them: reverse mortgages. Today’s report presents the findings of that study.

A reverse mortgage is a special type of home loan that allows older homeowners to access the equity they have built up in their homes now, and defer payment of the loan until they pass away, sell, or move out of the home. Reverse mortgages require no monthly mortgage payments, but borrowers are still responsible for property taxes and homeowner’s insurance.

Our study finds that reverse mortgages are complex products that are difficult for consumers to understand. Borrowers are also increasingly using reverse mortgages in ways that are different from what was intended. Nearly half of recent borrowers were in their 60s, and nearly 3 out of 4 borrowers took all of their money upfront in a lump sum. The Bureau is concerned that these borrowers will have fewer resources to pay for everyday and major expenses later in life.

Deceptive marketing is a long-standing problem in this market, with many older Americans receiving solicitations implying that a reverse mortgage is a government benefit rather than a loan. Prospective borrowers are required to attend counseling, but these deceptive advertisements and an increased array of product options make the counselor’s job very difficult.

We have submitted a Notice and Request for Information to gather public input on follow-up questions about reverse mortgages. We are seeking feedback on the factors most important to consumers when they are considering a reverse mortgage, the way consumers use reverse mortgage proceeds, the longer-term outcomes of reverse mortgage borrowers, and certain practices that may differ depending on the type of business that is offering the reverse mortgage . Sign up for our email list and we’ll notify you when the comment period opens. You can view the Request for Information here

Additionally, our Office of Older Americans released a 4-page consumer guide to reverse mortgages and a new and improved set of answers to common reverse mortgages questions on Ask CFPB. We’re also taking complaints on reverse mortgages through our complaint system.

Join the conversation. Follow CFPB on Twitter and Facebook .