(202) 708-0685 http://www.hud.gov/news/index.cfm (http://www.hud.gov/news/index.cfm)
FHA ANNOUNCES NEW GUIDANCE PROHIBITING DECEPTIVE MARKETING
AND ADVERTISING PRACTICES IN REVERSE MORTGAGE PROGRAM
FHA's guidance is intended to protect HECM borrowers from misleading advertising and presentations that appear to limit their options rather than informing them of the full range of available HECM offerings.
"Senior borrowers deserve freedom of choice when considering whether a reverse mortgage is appropriate for them," said FHA Commissioner
FHA-approved lenders are required to explain in clear, consistent language all requirements and features of the HECM program and may not mislead or otherwise cause a senior borrower to believe that the HECM product contains any features or limitations that are inconsistent with FHA's requirements. For example, the mortgagee must explain:
* FHA insures fixed interest rate mortgages, as well as annual and monthly adjustable interest rate mortgages;
* The borrower has the ability to change the method of payment under the reverse mortgage ARM products at any time provided funds are available;
* Fixed interest rate mortgages are limited to the Single Disbursement Lump Sum payment option where there is a one-time draw at loan closing and no future draws post loan closing;
* Adjustable interest rate mortgages provide for five, flexible payment options, and allow future draws;
* The amount of funds available to the mortgagor is currently determined by the age of the youngest mortgagor, and
* The disbursement of mortgage proceeds during the first twelve-month disbursement period is subject to an initial disbursement limit as determined by requirements set by the Secretary.
Lenders are prohibited from using any misleading or misrepresentative advertising or marketing materials in connection with the HECM program or from making any statement or representation that could mislead a mortgagor as to his or her rights under a HECM. In addition, mortgagees may not state or imply that as a result of their approval to participate in FHA programs that any of their products have been endorsed by FHA or HUD. All advertisements or marketing materials used in connection with the HECM program must include a prominently displayed disclaimer that clearly informs the public that such materials are not from HUD or FHA and the document was not approved by the Department or
HUD is working to strengthen the housing market to bolster the economy and protect consumers; meet the
need for quality affordable rental homes: utilize housing as a platform for improving quality of life; build
inclusive and sustainable communities free from discrimination; and transform the way HUD does business.
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