The Consumer Protection Financial Bureau fined the 3 leading reverse mortgage lenders in January, 2017 for using deceptive advertising to sell reverse mortgages. The fines totaled $800k and the bureau ordered the company to stop using misleading ads, some of which dated back to early 2012.

A reverse mortgage is a type pf loan that is usually targeted towards older Americans. A reverse mortgage can be a good tool for a homeowner who expects to remain in the home for many years and continue to pay the taxes and insurance but as borrowers age, these payments can become surprisingly unaffordable. These television and print ads, however, are often marketed featuring reassuring celebrity spokesmen (Fred Thompson/ Tom Selleck). Revere mortgages ae loans that carry interest and fees and can look deceptively alluring but they usually are fraught with dangerous details. Reverse mortgages let borrowers, 62 or older, draw on the equity in their homes, and they can be useful for home owners who have little in retirement savings but have substantial equity. Borrowers can receive the funds in lump-sums, monthly payments or lines of credit and repayment is deferred until the borrower dies, moves out or sells the home.

In the advertisements, the companies promoted the loans as risk free, but the homeowners can easily default on these loans and lose the homes in foreclosure if they fail to make certain payments like property taxes, insurance or maintenance. That is what the CPFB was targeting when it levied these fines. The CFPB said that the companies were tricking consumers into thinking that they could never lose their homes through a reverse mortgage, a claim that the CFPB asserts is patently untrue. The companies did not admit or deny the allegations but they paid the fines.

Since its peak in 2009 the use of reverse mortgages has fallen dramatically. Only about 49,000 reverse mortgages were made between September 2015 and September 2016.