The National Reverse Mortgage Lenders Association (NRMLA) has formally requested that the Consumer Financial Protection Bureau (CFPB) develop a new disclosure framework specifically for reverse mortgages. In a comment letter dated August 10, NRMLA argued that the current disclosure system, which largely relies on concepts from forward mortgage lending, is not optimal for consumers seeking to understand the complexities and risks associated with reverse mortgages.
NRMLA supports the creation of integrated reverse mortgage disclosures that would provide borrowers with more transparent information regarding loan costs, available payment options, ongoing borrower responsibilities, and existing consumer protections. The trade group recommended that any proposed changes undergo a formal notice-and-comment rulemaking process and include a substantial implementation period for all industry participants, including lenders, servicers, and vendors.
Steve Irwin, President of NRMLA, stated in the letter that reverse mortgages possess unique characteristics that render certain generic forward-mortgage disclosure concepts less effective for consumers. A key recommendation from the association is to supplement or entirely replace the current Total Annual Loan Cost (TALC) presentation with dollar-based illustrations. NRMLA noted that TALC calculations depend on life expectancy tables that may need updating with more recent demographic data and that consumers often struggle to comprehend the percentage-based TALC table. Citing 2010 Federal Reserve Board consumer testing, NRMLA highlighted instances where participants misunderstood the TALC table, sometimes interpreting its percentages as a declining interest rate. Dollar-based tables, the association suggested, could alleviate this confusion.
The proposed dollar-based disclosure could illustrate loan balances and home values under various scenarios, including a flat home value, enabling borrowers to visualize potential equity changes over time. NRMLA also recommended displaying cumulative amounts received, accrued interest and fees, and projected outstanding balances at specific future points. The association suggested that TALC percentages could be retained as a secondary comparison tool, with dollar amounts serving as the primary means of conveying the financial implications of a reverse mortgage.
Furthermore, NRMLA proposed consolidating the Truth in Lending Act (TILA) reverse mortgage disclosure and the Home Equity Conversion Mortgage (HECM) program disclosure into a single, simplified document. This combined form should omit generic forward mortgage information irrelevant to reverse mortgages and replace the existing “Considering a Reverse Mortgage” booklet with a tailored disclosure. This document would cover key terms, roles, costs, obligations, interest rate concepts, counseling requirements, and safeguards like the nonrecourse feature and protections for nonborrowing spouses. It would also detail disbursement options such as fixed draws, tenures, term payments, and lines of credit, along with initial disbursement limits. The disclosure should also clearly outline conditions that could trigger a loan becoming due and payable, such as failing to maintain the property as a principal residence, neglecting property charges, transferring ownership, or failing to maintain its condition.
NRMLA cautioned against creating an overly rigid standardized form, acknowledging the ongoing innovation in proprietary reverse mortgages. They advocated for a framework that establishes standardized core information while allowing lenders to supplement disclosures to accurately reflect individual product features and protections. The association indicated it would provide further comments if the CFPB proposes specific rule changes and urged the agency to grant sufficient implementation time.
