Consumer advocacy organizations reviewing lawsuits against reverse mortgage lenders identify hostile treatment of older borrowers and their heirs. The Consumer Financial Protection Board (CFPB) collected official complaints and provides an analysis file (as of end of 2024).
Borrowers’ reverse mortgages may be foreclosed for failure to pay taxes and assessment, failure to pay insurance, or failure to maintain the property. These payment failures are common if borrowers are unfamiliar with reverse mortgage procedures. When surviving spouses are not up to date on the reverse mortgage, missing payments – effectively voiding a spouse’s right to remain in the home after the original borrower dies or moves out. The heirs of reverse mortgage borrowers may lose significant home equity if they are not able to sell or refinance the home to satisfy the loan. To address the generational wealth gap, reducing the number of preventable reverse mortgage foreclosures is important.
This study examines CFPB complaints about 4,801 reverse mortgages and 409,838 regular mortgages. We find that reverse mortgage borrowers have more than twice the ratio of complaints for communications with the company, issues with the application process, paying off the loan, foreclosure, and inadequate closing disclosures.
JMP Text Analysis is used to identify conceptual clusters of borrower experience. Latent semantic analysis identifies very different substantive vectors between reverse mortgage and forward mortgage borrowers. In the end, picking up the direct quotations flagged by the concept vectors can bring the neutral reader to tears.
