The report from the bureau's Office of Mortgage Markets highlights the differences between Home Equity Investment (HEI) products and Home Equity Conversion Mortgages (HECM). While HEI companies market their offerings as superior, they carry risks reminiscent of pre-2008 lending practices. HEI products often have no monthly payments but compel consumers to shoulder additional costs like taxes and insurance, creating potential financial burdens. In contrast, HECM loans have regulations and insurance from the FHA, offering some protections to seniors. The bureau emphasizes the need for consumers to scrutinize the marketing claims made by HEI companies.
The bureau's findings suggest that HEI companies often market their products as superior alternatives to reverse mortgages, promoting them as non-debt-based while hiding associated risks.
Unregulated home equity contracts mirror risky loan features from the 2008 housing crisis, claiming no monthly payments while exposing consumers to potential balloon payments at maturity.
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