New York Attorney General Eric Schneiderman announced a settlement on Monday with New View Mortgage Corp., a reverse mortgage lender he accused of using misleading advertising solicitations on seniors.
The Woodbury, N.Y., mortgage banking firm misrepresented itself to about 10,000 seniors by pretending to be a government entity, Schneiderman said in a press release announcing this settlement.
The solicitation notices were mailed in envelopes that read "Economic Stimulus Notice" and "Government Lending Division," with the body of the letter identifying the sender as a "Federal Housing Administration Home Benefit HECM Program."
Reverse mortgages allow homeowners who are 62 years or older to convert part of the equity in their home into cash. The borrower does not have to pay back a reverse mortgage loan until the home is sold or otherwise vacated. The predominant reverse mortgage is the FHA-insured Home Equity Conversion Mortgage.
New View also allegedly deceived seniors by omitting information from its pitches. In the company's solicitations, there was a section claiming to provide "facts you need to know" about HECMs, Schneiderman said, but it described only the advantages reverse mortgages have for a borrower and none of the risks. For example, the solicitation notice correctly stated that a borrower does not have to make monthly mortgage payments. However, the advertisement failed to disclose that consumers who agree to a reverse mortgage are still responsible for tax and insurance payments.
Additionally, the solicitation stated that a borrower's heir will inherit all remaining equity, but did not mention that an heir still has to pay off the reverse mortgage loan to keep the home.
As part of the settlement, New View will pay a penalty of $12,500 and agreed not to further misrepresent the features, benefits, and eligibility requirements of reverse mortgages in future solicitation notices.
New View could not be reached for comment on the settlement.
"Making New York more affordable for the middle class includes protecting consumers from false and misleading advertising practices," Schneiderman said. "Our office will hold companies accountable when they seek to rip off or defraud seniors and require them to comply with the letter of the law."