On 4/27/21, the Consumer Financial Protection bureau (CFPB) announced that it had taken action against Nationwide Equities Corporation for sending deceptive loan advertisements to hundreds of thousands of older borrowers. In their release, the Bureau explained that it had found that advertisements from Nationwide Equities misled consumers about how much money they could receive from a reverse mortgage, the fees and costs associated with the products, and the consequences of nonpayment. In addition, the advertisements violated the Mortgage Acts and Practices Advertising Rule (MAP Rule), the Truth in Lending Act (TILA), and the Consumer Financial Protection Act of 2010 (CFPA). The CFPB is ordering the company to pay a penalty, cease its illegal conduct, and implement a compliance plan to affirmatively review every advertisement to ensure they do not violate federal law.
According to the CFPB’s release:
“Nationwide Equities is a mortgage broker and direct lender that offers and originates reverse mortgage loans, primarily home equity conversion mortgage loans and private jumbo reverse mortgage loans. The company, headquartered in Mahwah, New Jersey, is one of the largest reverse mortgage lenders in the United States, is licensed in 17 states and the District of Columbia, and operates three retail branches across the country.
A reverse mortgage is a special type of home loan that allows homeowners who are 62 or older to access the equity they have built up in their homes and defer payment of the loan until they pass away, sell, or move out. The loan proceeds are generally provided to the borrowers as lump-sum payments, monthly payments, or as lines of credit. Homeowners remain responsible for payment of taxes, insurance and home maintenance, among other obligations.
The MAP Rule prohibits misleading claims in mortgage advertising. The TILA requires accurate disclosures of the terms and costs of consumer loans. In addition, the Dodd-Frank Wall Street Reform and Consumer Protection Act prohibits institutions from violating Federal consumer financial laws, including with regard to advertising of consumer financial products or services under the MAP Rule and TILA.”
In their release, the CFPB said that it found deceptive and illegal advertisements and letters and included:
Hidden costs: The advertisements misrepresented the costs of the reverse mortgages Nationwide Equities offered, including the fees it charged for the loans, as well as the associated taxes and insurance.
Hidden risks: Nationwide Equities hid the fact that borrowers must continue to pay taxes and insurance or risk losing their home.
False existing relationship: Letters sent by Nationwide Equities made it appear that the consumer already had an existing relationship with the lender.
False Pre-approvals: Nationwide Equities told consumers they were pre-approved for specific loan amounts when they were not and misrepresented the potential savings from refinancing consumers’ existing reverse mortgages.
The CFPB’s release also explained that it found multiple violations of either the MAP Rule, the TILA, and/or the CFPA by misrepresenting the:
Fees, costs, or payments;
Taxes and insurance;
Potential for default and right to reside in the dwelling;
Association of the product or provider, or source of the communications;
Available cash or credit; and
Likelihood to obtain a particular term or refinancing.
The CFPB’s consent order requires Nationwide Equities to:
Stop sending deceptive advertisements: Nationwide Equities must immediately cease all illegal advertising practices.
Implement a compliance plan: The company must develop and implement a system to ensure all future advertising templates are affirmatively reviewed for compliance with federal consumer financial law.
Pay a civil penalty: The order also imposes a penalty of $140,000 to be paid to the Bureau and deposited in the CFPB’s Civil Penalty Fund.
The CFPB’s consent order can be found here.