A new CFPB report on consumer complaints from seniors finds a sharp uptick in mortgage problems.
Each week, Consolidated Credit searches for financial research that can help you deal with your debt and budget. This week…
The interesting study
The Consumer Financial Protection Bureau (CFPB) tracks consumer complaints nationwide to see which financial services give people the most trouble. This month, they release a new monthly complaint report that focuses on older consumer complaints. Those include any issues raised by consumers over the age of 62.
The big result
One in four consumer complaints received from seniors (26%) involves a mortgage product. That’s significantly higher than other age brackets. Only 16% of CFPB complaints received for consumers under the age of 62 were mortgage-related.
The fascinating details
Older consumers tend to have lower rates of trouble with:
- Debt collection – 25% of all senior complaints vs. 32% for younger consumers
- Credit reporting – 13% for seniors vs. 22% for younger consumers
But seniors have more issues with mortgages, as well as credit cards and bank accounts:
- Credit cards – 14% of all senior complaints vs. 9% for those under age 62
- Bank accounts – 12% for seniors vs. 7% for other consumers
So why do seniors struggle more with mortgages? These are the types of mortgage complaints that the CFPB receives from seniors:
- 40% are unable to pay
- 39% problem making payments
- 12% issues when applying for a loan
- 6% signing the agreement
- 3% receiving a credit offer
What’s more, issues with reverse mortgages account for 1.5% of all CFPB mortgage complaints received. Reverse mortgages are only available to senior homeowners age 62 and older. So, this type of complaint usually only comes from older consumers.
Issues with Reverse Mortgages run parallel to the issues seniors complain about with other types of mortgage products:
- 29% face customer service issues when they’re unable to pay
- 33% encounter trouble when making payments
- 16% have issues during the loan application
- 9% have problems with signing the agreement
- 2% complain about receiving credit offers
The CFPB report explicitly states, “In 2017, older consumers with a reverse mortgage reported being at risk of foreclosure when they were unable to timely pay property taxes and homeowner’s insurance.”
What you can do
“Reverse mortgages can be an extremely beneficial tool for senior homeowners age 62 and older,” explains Maria Gaitan, Director of Housing Counseling for Consolidated Credit. “However, it’s important for seniors to become educated about these products before they sign any agreement.”
Here are some basic facts about reverse mortgages:
- They are only available for seniors age 62 and older who live in a property as their primary residence
- You don’t have to make monthly mortgage payments to the lender, so there’s a low risk of foreclosure
- However, the homeowner MUST pay annual property taxes and homeowner’s insurance; they must also keep up the maintenance on the property.
- The borrower continues to own their home
- The principal and interest only come due if:
- The homeowner moves or the last living owner passes away
- The homeowner fails to keep up with repairs, taxes or insurance
It’s that last part that traps many seniors. They may believe they don’t face any risk of foreclosure. However, if the lender finds that you’ve failed to make repairs or keep up with taxes and insurance, you can face a demand for full repayment. That, subsequently, leads to the payment issues described above and risk of foreclosure.
“Always talk to a HUD-certified housing counselor before you sign up for any mortgage product,” Gaitan advises. “But reverse mortgage counseling is especially important for seniors. In this case counseling is mandatory, but homeowners need to pay careful attention and ask as many questions as possible. This can help avoid issues after you sign your agreement.”
To speak to a HUD-certified housing counselor confidentially at no charge, call 1-800-435-2261.