The federal Consumer Financial Protection Bureau said Wednesday that it has fined two Southern California reverse-mortgage firms for deceptive advertising practices, saying the companies wrongly told borrowers they could not lose their homes.
American Advisors Group in Orange agreed to pay a civil penalty of $400,000, and Aegean Financial, an El Segundo firm that also does business as Jubilados Financial and Reverse Mortgage Professionals, will pay $65,000. Both companies agreed to change their loan disclosures, though neither admitted wrongdoing.
Reverse mortgages, which are aimed at homeowners who are retired or approaching retirement, give homeowners cash in exchange for equity in their homes. Borrowers typically are able to remain in their homes until they die or choose to sell.
But the CFPB alleges that advertisements from Aegean, American Advisors and another firm — Reverse Mortgage Solutions in Houston — falsely implied that borrowers could stay in their homes under any conditions.
Borrowers can default on a reverse mortgage, and possibly lose their homes, if they fail to meet certain loan terms, including paying property taxes, having homeowners insurance and maintaining their homes. That sometimes happens when borrowers take a lump-sum payout and later run out of money to pay taxes, insurance and upkeep.
A growing number of such reverse-mortgage defaults over the last few years has prompted the government to require more underwriting of borrowers to make sure that they can pay ongoing obligations and to tighten procedures governing foreclosures prompted by delinquencies involving Federal Housing Administration-insured mortgages.
“These companies tricked consumers into believing they could not lose their homes with a reverse mortgage,” CFPB Director Richard Cordray said in a news release announcing the fines.
The bureau also said Aegean, in its Spanish-language advertising, falsely implied that its reverse mortgages came from a federal agency. Although some reverse mortgages are federally insured, they are not a government benefit, the CFPB said Wednesday.
A spokesman for Aegean declined to comment on the CFPB’s action.
In an emailed statement, Reza Jahangiri, chief executive of American Advisors Group, said the company takes its regulatory responsibilities seriously and has made “a significant investment in our compliance and legal infrastructure to ensure we fully conform to all marketing laws and rules — and better understand how they are interpreted.”
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