Monday, August 30, 2010

FRB Proposes Significant Changes to Reverse Mtg Disclosures and Ads

The Federal Reserve Board recently proposed significant changes to reverse mortgage advertisements and disclosures.

The Federal Register notice for the proposed rule is available at:

These proposed rules would:

• Impose rules for reverse mortgage advertising to ensure advertisements contain accurate and balanced information.

• Change the disclosures consumers receive for reverse mortgages, including: (a) at application, creditors must provide a new, two-page disclosure which highlights in simple language the basic features and risks of reverse mortgages; (b) within three days after receiving the consumer’s application, creditors must provide transaction-specific disclosures that reflect the actual terms of the reverse mortgage being offered, which must be presented in a tabular format; (c) at least three days before closing the loan, creditors must provide final disclosures in the same format, to facilitate comparison with the earlier disclosures; and (d) creditors also must ensure that their advertisements for reverse mortgages are accurate and balanced.

• Prohibit certain unfair practices in the sale of financial products with reverse mortgages, such as: (a) prohibiting creditors from conditioning a reverse mortgage on the consumer's purchase of another financial or insurance product; (b) requiring that a consumer receive counseling about reverse mortgages before a creditor can impose nonrefundable fees for a reverse mortgage or close the loan; and (c) prohibiting creditors from steering consumers to specific reverse mortgage counselors or compensating counselors or counseling agencies.

The comment period ends 90 days after publication of the proposal in the Federal Register, which is expected shortly.