The Consumer Financial Protection Bureau (CFPB) announced Friday that the U.S. District Court for the Central District of California has approved a settlement with leading reverse mortgage lender American Advisors Group (AAG), following a complaint filed by the Bureau against the lender in October.
The complaint alleged that AAG sent misleading and inflated home estimates to borrowers by direct mail to convince seniors to take out a reverse mortgage, and that the relevant correspondence advertised a significant “estimated home value” that the CFPB, was swollen.
“Last week, the court approved the CFPB settlement with American Advisors Group (AAG), the largest reverse mortgage lender in the United States,” CFPB said on Friday. “The CFPB complaint alleged that AAG used inflated and misleading home estimates to trick consumers into taking out reverse mortgages, as well as a violation of a 2016 administrative consent order that cracked down on misleading advertising by” AAG re reverse mortgages. ”
Under the terms of the settlement agreement, AAG is prohibited “from any future illegal behavior” and “requests that AAG provide a link with the CFPB Reverse Mortgage: A Discussion Guide on all direct mail solicitations to potential borrowers and a link to the CFPB Guide, You have a reverse mortgage: know your rights and responsibilities in welcome communications to borrowers with newly created reverse mortgages.
The lender is also required to pay $ 173,400 in “consumer recourse” and an additional $ 1.1 million in civil fine.
During RMD and HousingWire’s initial investigation, the CFPB did not elaborate on how it determined that the house values would have been inflated by AAG, and offered no further corroboration between the allegedly “inflated” values and the exact values of the problem-relevant properties.
“Through the lawsuit, the midpoint of these values was inflated by an average of 18%, while at the high end, the values were on average 28% higher,” wrote Georgia Kromrei, senior mortgage reporter for HousingWire, in the initial settlement coverage by RMD.
At the time of settlement, a spokesperson for AAG told RMD that the values in question were “not always accurate” and that the company had fully cooperated with the CFPB.
“AAG is built on its core values of being caring, motivated and ethical,” the spokesperson said in October. “We take these types of marketing issues seriously and are committed to providing our clients with clear and accurate information to help them responsibly access their home equity. “