Two of the top five lenders in the reverse mortgage industry are now engaged in a legal skirmish over marketing practices that one lender calls deceptive.
Longbridge Financial, a top five reverse mortgage lender and servicer based in New Jersey, is suing Mutual of Omaha Mortgage over a series of websites maintained by the latter. Longbridge alleges that these websites are both deceptive and in violation of the Real Estate Settlement Procedures Act (RESPA) as well as guidance from the Federal Trade Commission (FTC). This is according to court filings reviewed by HousingWire’s Reverse Mortgage Daily (RMD).
Filed in the U.S. District Court for the Southern District of California, Longbridge is seeking a jury trial and an injunction that would require Mutual of Omaha to take down the allegedly deceptive websites. It also seeks restitutionary, compensatory and punitive damages that would be determined in court.
Websites at issue
Alongside Mutual of Omaha, Longbridge is filing suit against two other companies: California-based Review Counsel LLC and Delaware-based Advisory Institute LLC. Both entities are either owned or controlled by Mutual of Omaha, but their respective websites feature ratings of reverse mortgage lenders that Longbridge allegedly suggests independence to readers.
That independence is a smoke screen, according to Longbridge. In the case of Review Counsel, the entity is owned by Mutual of Omaha for the purposes of “mortgage lead generation,” which Longbridge allegedly corroborates based on a filing with California’s Secretary of State. RMD verified through online records with the secretary’s office that Review Counsel’s mailing address is one shared with Mutual of Omaha, but it could not independently confirm the lead generation claim.
Additionally, “the site publishes false and misleading ‘ratings’ of reverse mortgage providers that score Mutual of Omaha far higher than its competitors based on factual misrepresentations and highly skewed rating criteria,” Longbridge alleges in its complaint. Longbridge also states that certain informational blog posts on the Review Counsel website are written by Mutual of Omaha’s director of marketing communications.
With Advisory Institute, there is a similar ownership relationship between that entity and Mutual of Omaha, Longbridge alleges. Its website offers “the most reliable information and ratings, which is why we are committed to being transparent in how those results come about” according to its dedicated ratings page.
Retirement Funding Solutions
Longbridge also highlights the presence of a website for Retirement Funding Solutions (RFS), which was the brand that the reverse mortgage arm of Mutual of Omaha previously operated under. In 2019, this division transitioned primarily to the Mutual of Omaha name, but an RFS website is maintained by the company, according to the complaint.
“The RFS website falsely presents RFS as a real financial services company offering its own reverse mortgage products separate from Mutual of Omaha and providing unbiased educational tools and advice about reverse mortgages,” the complaint states. “In reality, RFS offers no products at all. RFS is merely a DBA of Mutual of Omaha operating out of the same office as Mutual in San Diego, and the ‘educational’ materials published on the website are drafted by Mutual’s marketing team.”
Longbridge goes on to allege that the RFS website is simply a funneling tool for consumers to Mutual of Omaha’s products, “backstopping the false narrative on the Review Counsel and Advisory Institute websites that RFS is an alternative to Mutual of Omaha,” the complaint alleges.
RESPA, FTC guidance allegations
Longbridge alleges that Mutual of Omaha has violated both RESPA and guidance from the FTC. In 2023, the Consumer Financial Protection Bureau (CFPB) issued an advisory opinion in which it said that mortgage comparison websites that provide “enhanced placement or otherwise steers consumers” to certain operators based on compensation are in violation of RESPA Section 8, an opinion cited by Longbridge in its complaint.
Longbridge also alleges that Mutual of Omaha is in conflict with FTC guidance, saying “the FTC has issued guidance related to advertisements and expert endorsements that defendants’ conduct plainly violates.”
On its website, the FTC says that under the law, “claims in advertisements must be truthful, cannot be deceptive or unfair, and must be evidence-based. For some specialized products or services, additional rules may apply.“
RMD looked up the website registration information of both Review Counsel and Advisory Institute, but the entries on the public WHOIS database are redacted. Any website domain owner can choose to redact this information from public information sources for privacy purposes if they elect to do so.
RMD reached out to representatives at both Longbridge and Mutual of Omaha. Longbridge declined to comment, while Mutual of Omaha said it does not comment on pending litigation. A summons was issued on Sept. 27, but Mutual of Omaha had yet to respond to the allegations on the court docket as of Monday afternoon.
According to Home Equity Conversion Mortgage (HECM) endorsement data compiled by Reverse Market Insight (RMI), Mutual of Omaha and Longbridge are the second and third largest reverse mortgage lenders in the country. Mutual of Omaha has recorded 6,203 HECM endorsements year to date as of Aug. 30, with Longbridge posting 2,966.
What a sad moment in the history of the industry. First the lawsuit is announced and tomorrow we should find out just how really bad HECM endorsements were for the fiscal year that ended today.
Let us look at the three worst fiscal years for HECM endorsements since 9/30/2003 (21 years ago today). Each of the following amount of HECM endorsements reflect 11 months of HECM endorsements as of August 31 of the respective fiscal year.
1) Our worst fiscal year was 2019 which had 28,854 HECM endorsements as of 8/31/2019
2) Our second worst fiscal year was 2023 with 30,377 HECM endorsements on 8/31/2023
This fiscal year only had 24,368 HECM endorsements on 8/31/2024. There is a chance we will not reach 27,000 HECM endorsements this fiscal year.
There was a rumor that one industry leader reported that as of 8/31/2024, we were down just 10% from the year before. The actual drop is almost twice that at 19.8%.
In comparison to the 11 month HECM endorsement count as of 8/31/2019, the HECM endorsement count as of 8/31/2024 is 15.5% lower.
The ultra optimists in the industry may want to argue that fiscal year 2024 (especially after all the energy and celebration spent at the NRMLA convention) is not closed yet!! They are right; it is not closed for another 110 minutes or so but the hand writing is on the wall and should be disclosed in the next 6 hours.
Before the final count is posted, there is absolutely no question that fiscal year 2024 is the very worst year for HECM endorsements since 2003. After the actual drop sinks in, realize that right now based on the case number assignments last three months (June, July, and August 2024), the first quarter of fiscal 2025 that will end on 12/31/2024 will have a worse total for HECM endorsements than for the first quarter of fiscal 2024 that ended on 12/31/2023.
There is a huge difference between the fun of the convention and the harsh reality that is the industry’s for the next 93 days. The only question is just how bad will fiscal year 2025 be as to HECM endorsements; hopefully, it will be better than this fiscal year that was just celebrated in San Diego but be prepared, just in case….