Rep. Josh Harder (D), a U.S. congressman serving the state of California’s 10th district encompassing parts of the San Joaquin Valley, recently submitted a letter to Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra urging the Bureau to take more stringent action against the reverse mortgage industry.

Citing a recent settlement the Bureau entered into with reverse mortgage lender American Advisors Group (AAG), Rep. Harder says that such an instance highlights a need for more stringent regulatory action to be taken broadly against “bad actors in the housing market” as he said on his website announcing the letter’s submission. However, the Congressman does not cite any specific actions he believes should be taken by CFPB and does not maintain any committee memberships in the House that indicate any previous engagement with the industry.

The office of Rep. Harder did not respond to comment requests by press time. When reached, a representative for AAG declined to comment on the letter’s content. A representative with the National Reverse Mortgage Lenders Association (NRMLA) elected not to comment at this time.

Content of the letter

Rep. Harder did not indicate in his letter what caused his attention to be turned to the reverse mortgage industry in the first place outside of the aforementioned settlement, only saying that more actions should be taken. He does call the reverse mortgage product one that can assist American seniors, but takes issue with what he describes as a light settlement with a major lender in the space.

“Reverse mortgages offer a lifeline to senior homeowners by giving them an additional income to help them through emergencies or compensate for a fixed income,” Harder says in the letter. “But deceptive and manipulative practices, such as inflating home prices and false advertising have turned this safety net into a trap.”

The recent CFPB settlement indicated that seniors who pay out of pocket for home appraisals only learned later that they would not be entitled to as many loan proceeds as they initially believed, he says, indicating more action is required on the part of Chopra and the CFPB.

“Our seniors are already one of the most vulnerable populations and many are already facing financial insecurity,” Harder says. “Scams such as these are a threat to seniors and must be punished by CFPB to the fullest extent.”

He goes on to describe that recent settlements reached between reverse mortgage lenders and the Bureau amount to a “slap on the wrist,” he says, and calls for more “severe penalties for reverse mortgage lenders” who have been found to “prey on vulnerable populations,” he concluded.

No prior interactions with the reverse mortgage industry, bipartisan support for HECM

Rep. Harder currently sits on agriculture and appropriations committees in the U.S. House of Representatives, including memberships in subcommittees related to biotechnology, livestock, labor and the environment, respectively. Rep. Harder has not held any memberships in the House Financial Services Committee nor its Subcommittee on Housing, Community Development, and Insurance, which in the past has held proceedings directly related to the reverse mortgage product category.

Bipartisan members of that subcommittee have previously demonstrated support for the Home Equity Conversion Mortgage (HECM) program administered by the Federal Housing Administration (FHA). In a late 2019 hearing specifically about the HECM program, Republican Reps. Lance Gooden (R-Tex.) and Scott Tipton (R-Colo.) expressed general support. Rep. Maxine Waters (D-Calif.), a colleague of Rep. Harder’s in California and chair of the Financial Services Committee, described her evolution on the topic in the 2019 hearing from one of skepticism to one of support.

“There have been years where I have been concerned about the program, and wondering whether or not it was doing what it was supposed to do,” Waters said at the time. “And again, let me reiterate that I do recognize that it has value that must be protected, and value that must be extended so that we make sure we’re providing the kind of safety and security that our seniors need and deserve.”

Chopra and calls for more severe fines

In his letter, Harder explicitly indicates a belief that the CFPB needs to impose stricter penalties on reverse mortgage lenders for violations, feeling that the cited amounts in previous settlements were insufficient. In the past, Chopra himself has advocated for stricter fines on companies that have been found to have violated specific laws and standards.

During his time as a commissioner for the Federal Trade Commission (FTC), Chopra dissented on several occasions with settlement decisions he felt were too narrow in focus or light on enforcement. He provided a dissenting opinion on a 2019 settlement decision related to the business practices of tech giant and social media platform Facebook. The FTC alleged that the social media giant violated its privacy promises to consumers and subsequently violated a 2012 Commission order related to protecting user data. Then-Commissioner Chopra blasted the settlement as insufficient in a 2019 dissenting opinion.

“In this matter, I believe that the Commissioners cut off the inquiry too early, leaving too many stones unturned, in favor of this proposed settlement,” Chopra said at the time. “The fine print in this settlement gives Facebook a lot to celebrate, particularly when it comes to the blanket immunity for unspecified violations by Facebook and its executives. This is a disappointing precedent for the FTC to set, since more companies may now seek ways to buy broad immunity.”

Now, however, a member of Chopra’s political party is saying that the settlement action toward a reverse mortgage lender, as directed by a Chopra-led agency, amounts to a “slap on the wrist.” When reached for comment, a representative of the CFPB indicated that the Bureau and Director Chopra had not yet received the letter.

“The CFPB will review the letter upon receipt and respond to Rep. Harder,” a CFPB spokesperson told RMD.

Read the letter submitted by Rep. Harder to CFPB Director Chopra.