Reverse mortgage lender Nationwide Equities Corporation of Mahway, N.J., must cease its deceptive advertising, ensure its future activities comply with federal law, and pay a $140,000 civil money penalty under a consent order announced Tuesday by the Consumer Financial Protection Bureau (CFPB).
Nationwide Equities is licensed in 17 states and the District of Columbia and operates three retail branches across the country. The CFPB said that starting as far back as December 2015, the firm sent deceptive loan advertisements to hundreds of thousands of older borrowers that 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.
The bureau said the firm’s 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,” the agency said.
A reverse mortgage, the bureau noted, allows homeowners 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. 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, it said.
In its announcement, the CFPB said Nationwide Equities’ advertisements and letters 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 found that Nationwide Equities had multiple MAP Rule violations 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 April 26 consent order states that Nationwide Equities executed a stipulation and consent to issuance of a consent order April 20 that neither admits nor denies the CFPB’s findings.