2023 Data Spotlight: Trends in Reverse Mortgage Direct Mail Advertising

In a recent report by the Consumer Financial Protection Bureau (CFPB) Office for Older Americans, trends in reverse mortgage direct mail advertising were scrutinized to gain insights into the marketing and targeting strategies employed by the reverse mortgage industry.

Reverse mortgages have been a subject of ongoing monitoring by the CFPB due to their potential complexities and risks, especially for older adults. To assess market trends and potential consumer impacts, the CFPB analyzed the volume of reverse mortgage direct mail advertising from 2016 through 2022. Direct mail advertisements are often the first point of contact for consumers interested in reverse mortgages and can provide crucial information about these financial products.

Here are the key observations made by the CFPB:

1. Significant Increase in Advertising Volume (2021-2022): Reverse mortgage direct mail advertising experienced a substantial surge in volume during 2021 and 2022 compared to the previous five years. In 2021, an estimated 44 million direct mail advertisements were received by consumers, followed by 48 million ads in 2022. This increase is notable, considering that the volume was approximately 11 million each year in 2019 and 2020.

2. Targeting Low- and Middle-Income Households: The CFPB’s analysis revealed that a significant portion of reverse mortgage direct mail advertising was directed at consumers with low and moderate incomes (household income below $75,000). Approximately 74 percent of the advertising volume during 2021-2022 was focused on this income segment. This suggests that the advertising is disproportionately targeting households with lower incomes, as only 53 percent of households led by older homeowners fall into this income category.

3. Regional Concentration in the South and West: The majority of reverse mortgage direct mail advertising was directed towards states in the South and West Census regions. Approximately 84 percent of these ads were delivered to consumers living in these regions during 2021 and 2022. This concentration aligns with the geographic distribution of reverse mortgage lending activity and is indicative of areas where older homeowners may face challenges in meeting housing expenses.

4. Increase in Refinancing Mentions: Over the years, there has been a notable increase in reverse mortgage direct mail advertisements mentioning refinancing options. Refinancing references in these ads grew from 2016 onwards. In the period of 2016-2022, approximately 10 percent of the reverse mortgage advertising discussed refinancing, with a significant 87 percent of this volume occurring in 2021-2022.

These findings underscore the evolving landscape of reverse mortgage advertising and its potential impact on older homeowners. The surge in advertising during the COVID-19 pandemic, coinciding with rising home prices and falling interest rates, primarily targeted older homeowners with substantial home equity, lower incomes, and those residing in regions where housing payment challenges are more prevalent.

Furthermore, the increase in advertisements promoting reverse mortgage refinancing is concerning, as it suggests that lenders may be targeting existing reverse mortgage borrowers for costly refinancing options, potentially exacerbating financial difficulties for these consumers.

The CFPB emphasizes the importance of ensuring that alternative mortgage products, such as refinances and home equity lines of credit, are readily accessible to older homeowners. Additionally, unbiased information about reverse mortgages and alternative financial options must be provided to older adults to help them make informed decisions and protect them from potentially unlawful practices.

As the reverse mortgage landscape continues to evolve, the CFPB remains committed to monitoring the industry, identifying potential risks to older adults, and taking necessary steps to safeguard their interests.

Note: This article is based on the CFPB’s report for informational purposes and does not constitute financial advice.

Source: Consumer Financial Protection Bureau (CFPB)