WASHINGTON (8/15/12)--Reverse mortgages could soon come under Consumer Financial Protection Bureau (CFPB) regulation. Credit unions that offer reverse mortgages can provide their own comments on what drives their members to choose reverse mortgage products and how those members use reverse mortgage proceeds, in a new Credit Union National Association (CUNA) comment call.
The CFPB in June asked for public comment on reverse mortgages, which allow homeowners over age 62 to cash out a portion of their home equity. While these products are not widely available at credit unions, CUNA has asked credit unions if they have comments or concerns that should be passed on to the CFPB.
In their comments, credit unions that offer reverse mortgages can also detail how employees who sell reverse mortgages are compensated and provide more general comments.
The agency has asked for information on how the decision to enter a reverse mortgage transaction can impact consumers' long-term finances, and for any differences in market dynamics and business practices among the broker, correspondent, and retail channels for reverse mortgages.
The CFPB in a recent report called reverse mortgages "inherently complicated products that are not easy for the average consumer to understand." Federal disclosures and other tools provided to consumers "are insufficient to ensure that consumers are making good tradeoffs and decisions" when they take out reverse mortgages on their homes, the CFPB added.
While fewer than 3% of homeowners have taken out reverse mortgages on their homes, the CFPB noted that those who take out the reverse mortgages do so at younger ages. They also are taking out funds from their reverse mortgages sooner. These two factors may increase some of the financial risks associated with reverse mortgage products, CFPB said.
CUNA Senior Assistant General Counsel Jared Ihrig said the agency has the authority to regulate reverse mortgages, and the agency expects to undertake a project to integrate reverse mortgage Truth in Lending (TILA) and Real Estate Settlement Procedures Act (RESPA) disclosure requirements in a future rulemaking. This project would be separate from the agency's current TILA/RESPA integration project, which addresses the forms that are provided in connection with most traditional forward mortgage closed-end credit transactions.
For the CUNA comment call, use the resource link.