A national syndicated columnist has taken a closer look at the reverse mortgage product category after reviewing data from the Consumer Financial Protection Bureau (CFPB) about the industry’s advertising practices, and she says that the product can have utility for older Americans as long as a prospective borrower properly understands it.
Julie Jason, an investment adviser and author, highlighted a CFPB report released in August 2023 that took a closer look at reverse mortgage advertising, both prior to and following the most restrictive period of the COVID-19 pandemic.
“The ads go beyond acquiring a reverse mortgage,” Jason said in her column. “They are also directed to households that already have a reverse mortgage, with offers of refinancing, which raises a concern. About 51% of the ads that went to people in the West region were refinancing ads in 2021-2022.”
The report led to a similar response from another commentator shortly after it was released. In September 2023, Forbes columnist John Wasik cited the CFPB data to recommend against taking out a reverse mortgage, but he did not include some key information regarding the advertising practices of the reverse mortgage business.
The CFPB report itself was centered primarily on direct mail reverse mortgage advertising and largely focused on companies that participate in the Home Equity Conversion Mortgage (HECM) program. It found that reverse mortgage advertising increased “significantly” in 2021 and 2022, registering 44 million and 48 million ads, respectively. These figures represent a sharp rise from levels observed in 2019 and 2020, two years in which the average total was 11 million.
The reverse mortgage industry enjoyed a boom in business during the onset of the COVID-19 pandemic, largely fueled by HECM-to-HECM refinance transactions. Refis comprised at least 50% of reverse mortgage volume in 2021 and 2022, according to data from Reverse Market Insight (RMI).
“While reverse mortgages can create a safety net in the right cases, they can backfire in the wrong cases,” Jason said in her column. “As always, be prepared to do your homework before getting a reverse mortgage.”
The CFPB report expressed concern that older Americans, particularly lower-income seniors, were being specifically targeted by the reverse mortgage industry. But some of the concerns outlined in the report stem from HECM program requirements that homeowners 62 or older are the only borrowers who can qualify for a loan.
The CFPB acknowledged that there are eligibility requirements but maintained its concern since the targeted potential clients could have greater levels of financial vulnerability.
Late last year, RMD reached out to industry marketing professionals at loanDepot to ask about the continued viability of direct mail advertising. Both said it was here to stay for the time being.
“I think there’s absolutely a place for the physical, still,” chief marketing officer Alec Hanson said in October. “We all get junk mail, of course, but I really think there’s going to be a place for the physical marketing that will continue to be relevant. It’s going to take creativity in what you send somebody, that can help break through the noise of just all the junk that also shows up there.”
Eddie Herda, loanDepot’s vice president and creative director of brand strategy, added that considerations about how and when direct mail is deployed should be sensitive to the needs of the senior demographic.
