Gov't Cracks Down On Deceptive Lending

When a few California reverse mortgage firms told their customers they could not lose their homes, they made a huge mistake. For beginners, they are dead wrong, and they knew it. They were acting as predators. The federal Consumer Financial Protection Bureau got wind of it and fined several of these California based companies.

One company American Advisors Ground in Orange had to pay around $400,000, while the others paid only $65,000. After they paid their fines they changed their loan disclosures, they still wouldn’t admit to any wrong doing.

The game of reverse mortgages is designed for people who are retired, or getting close to retirement. It gives them money in exchange for equity in their homes, and are allowed to stay in their homes until they die or decide to sell.

The government claimed these groups falsely advertised to its customers they would keep their homes no matter what.

It’s completely possible for borrowers to default on their reverse mortgage and lose their home. Sometimes they have to fail elsewhere in payments too like property taxes, PMI, and even maintaining the upkeep of their home. What happens is buyers take that stack of cash and spend it all and don’t have any left to pay their taxes.

As the growing number of defaulted mortgages grows, the government began requiring more underwriting of borrowers to ensure they can pay their monthly obligations, and to tighten the policies surrounding foreclosures prompted by delinquencies involving the Federal Housing Administration and their insured mortgages.

The companies also implied that these mortgages were federally backed, which is also completely untrue. However, some mortgages are federally backed, but are not a government benefit.

The companies have since revamped their marketing campaigns and made legal compliance a vital part.

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