Division of Banks Orders Internet Reverse Mortgage Companies to Cease Activity in Massachusetts
Unlicensed internet-based entities offer inaccurate and misleading information to consumers
The five companies, Eldervantage, LLC; Lender 411, LLC; Senior Reverse Mortgage Online; Reverse Mortgage Helpdesk; and Reversemortgesite, were not approved to sell reverse mortgages in Massachusetts. The actions follow similar enforcement actions the Division of Banks has taken over the past three years in the area of unfair and deceptive advertising practices.
"None of these companies are approved as reverse mortgage brokers or mortgage lenders in Massachusetts and offer incomplete and misleading information" noted Commissioner of Banks David Cotney. "The Division of Banks will continue to aggressively identify and pursue unlicensed entities and educate consumers of the dangers of conducting business with such unverified companies."
Reverse mortgages are a special type of mortgage loan for senior citizens age 62 and older, which pays a homeowner loan proceeds drawn from accumulated home equity. Unlike a traditional home equity loan or second mortgage loan, no repayment is required until the borrower(s) no longer use their home as their principal residence. Interest on a conventional loan is calculated as simple interest while on a reverse mortgage the interest is calculated as compound interest.
Under Massachusetts law, all banks, credit unions and mortgagees, including federally-chartered banks and credit unions intending to make reverse mortgages, must have their program meet specific criteria set forth in Massachusetts General Laws Chapter 167E, Section 7, and be approved by the Division of Banks. Last August, Governor Patrick signed into law new consumer protections concerning reverse mortgage counseling and opt-in requirements. The Division of Banks plans on filing regulations on those protections this month.
None of the entities identified by the Division of Banks are approved to offer reverse mortgages in the Commonwealth. In addition, these entities collected personal information via the internet, made misleading statements about home ownership of homes, gave inaccurate information concerning the complexity of the product, and gave assurances of legal compliance with applicable regulations, where they were not.
"The Executive Office of Elder Affairs commends the work of the Division of Banks in making sure that our seniors are not subjected to incomplete or misleading information about reverse mortgages," said Secretary Ann Hartstein, whose office is charged with approving reverse mortgage counselors.
"The information provided by these entities is misleading, deceptive, and not permissible," said Consumer Affairs and Business Regulation Undersecretary Barbara Anthony. "Reverse mortgages are very complex products and are targeted to those elderly members of our population that are most vulnerable. It is imperative that those entities that market these products are providing clear and accurate information and operate within the confines of Massachusetts law."
When considering whether a reverse mortgage loan is right for you, be mindful of these key issues:
- Understand your obligations under the loan, i.e. to pay taxes, insurance, and maintain the property in a satisfactory condition. Failure to fulfill these obligations may constitute a default and possibly lead to foreclosure action;
- Know that reverse mortgage loans cannot have prepayment penalties or restrictions. Loans must be able to be prepaid in full or in part at any time without penalty;
- Understand that over time the loan balance may increase and impact the accumulated equity in your property, leaving little or no reserve for potential unexpected expense such as health care and home repair;
- Discuss the loan with trusted family members;
- Obtain independent legal and other financial advice prior to signing loan documents and retain your own legal representation at closing of the loan.
Additional information concerning reverse mortgage loans as well can be found at www.mass.gov/reversemortgage.
Anyone with additional questions regarding reverse mortgages may contact the Division of Banks' Consumer Hotline at 1-800-495-BANK (2265), extension 501.
The Division of Banks oversees state-chartered banks and credit unions, check cashers, debt collectors, foreign transmittal agencies, mortgage lenders, and mortgage brokers, and is an agency within the Office of Consumer Affairs and Business Regulation. Follow the Office at www.mass.gov/consumer, its Consumer Connections Blog and at its Twitter feed, @Mass_Consumer.