WHAT SHOULD BORROWERS EXPECT FROM LENDERS?

What Should Borrowers Expect From Lenders?

Posted By Dennis Haber On May 12, 2008 @ 1:49 am In Reverse Mortgage No Comments

For too long, too many lenders have been enlisting advertising campaigns that have overstepped the boundaries of reasonableness and fairness. NRMLA — the National Reverse Mortgage Lenders Association — has now set the bar with its first ethics ruling regarding advertising standards for reverse mortgage lenders.

At its eastern regional meeting in Philadelphia, NRMLA issued guidelines that every reverse mortgage lender should use — and every prospective borrower should know about. Some of the highlights include:

1. It is unethical and a violation of the NRMLA code of ethics to suggest that a loan is made by the government or FHA.

2. It is unethical and a violation of the code to suggest that a reverse mortgage is either funded by the government or is a benefit from the government. (The FHA insures most reverse mortgages, it provides no funding to borrowers or lenders.)

3. It is unethical to say that you must call a particular number first, before you can be entitled to benefits. (There is no reverse mortgage “benefit” anymore than there is a 30-year mortgage “benefit” for those who borrow a forward loan that’s FHA insured.)

4. It is unethical to suggest that a product or service must also be purchased as a condition to obtaining the reverse mortgage.

5. It is unethical to say that such a reverse mortgage is “endorsed” or “approved” by the government, HUD, AARP, FHA or NRMLA.

Since the conference, NRMLA has issued a second ethics advisory. Here are some of the highlights:


6. It is unethical to require an applicant to purchase any other product as a condition to receiving a reverse mortgage. (Think of insurance, home repairs, annuities, etc.)

7. It is unethical to refer, recommend, or offer other products that do
not provide a bona fide advantage to the senior borrower. Anyone offering other products must be appropriately licensed and follow all related rules, regulations and laws. (Think of the sale of annuities when considering this item.)

8. It is unethical to sell deferred, fixed-rate annuities or deferred variable rate annuities with surrender charges, and any financial product that contains a penalty for early withdrawal or cancellation if they do not provide a bona fide advantage to the senior. (Note that [1] BestReverseMortgage.com has consistently argued that lenders should not be allowed to sell annuities funded by reverse mortgages. Also, a number of reverse mortgage lenders refuse to sell annuities.)

9. It is appropriate and ethical to provide borrowers with written notices explaining that reverse mortgage products are complex, that caution needs to be used when considering such financial products and that it’s wise to consult with an independent professional before selecting any reverse mortgage option.

10. It is unethical to receive unreasonably high compensation as a result of cross selling. (Think of home repairs, annuities, etc.)

11. It is unethical not to provide timely, clear and concise information regarding cross selling compensation.

In the future, there will be many more such standards handed down. The challenge, I think, will be in the enforcement of same, when NRMLA members violate the letter and spirit of these opinions. It is far better that the industry police itself, rather than a governmental agency.
————————————

Attorney [2] Piggy Bank Your Home: Tap Into The Power Of A Reverse Mortgage.
--------------------------------------------------------------------------------
Article printed from Reverse Mortgage Guide: http://www.bestreversemortgage.com

URL to article: http://www.bestreversemortgage.com/reverse-mortgage/what-should-borrowers-expect-from-lenders/



URLs in this post:
[1] BestReverseMortgage.com: http://www.bestreversemortgage.com

[2] Piggy Bank Your Home: Tap Into The Power Of A Reverse Mortgage: http://www.piggybankyourhome.com