FR4029_20210914_omb

Supporting Statement for the
Interagency Guidance on Managing Compliance and
Reputation Risks for Reverse Mortgage Products
(FR 4029; OMB No. 7100-0330)
Summary
The Board of Governors of the Federal Reserve System (Board), under authority
delegated by the Office of Management and Budget (OMB), has extended for three years,
without revision, the Interagency Guidance on Managing Compliance and Reputation Risks for
Reverse Mortgage Products (FR 4029; OMB No. 7100-0330). Reverse mortgages are homesecured loans typically offered to elderly consumers. Financial institutions currently provide two
types of reverse mortgage products: the lenders’ own proprietary reverse mortgage products and
reverse mortgages insured by the Federal Housing Administration (FHA) within the U.S.
Department of Housing and Urban Development (HUD). Reverse mortgage loans insured by the
FHA are made pursuant to the guidelines and rules established by HUD’s Home Equity
Conversion Mortgage (HECM) program.1 HECM loans and proprietary reverse mortgages are
also subject to consumer financial protection laws and regulations (e.g., the regulations that
implement laws such as the Real Estate Settlement Procedures Act (RESPA) and the Truth in
Lending Act (TILA)).
In August 2010, the Federal Financial Institutions Examination Council (FFIEC), on
behalf of its member agencies,2 published a Federal Register notice adopting supervisory
guidance titled “Reverse Mortgage Products: Guidance for Managing Compliance and
Reputation Risks.”3 The guidance is designed to assist financial institutions with risk
management and efforts to ensure that their reverse mortgage lending practices adequately
address consumer compliance and reputation risks. The reverse mortgage guidance discusses the
reporting, recordkeeping, and disclosures required by federal laws and regulations and also
discusses consumer disclosures that financial institutions typically provide as a standard business
practice. Certain portions of the guidance are information collections subject to the Paperwork
Reduction Act’s (PRA) requirements.
The estimated total annual burden for the FR 4029 is 96 hours.
Background and Justification
Reverse mortgages enable eligible borrowers to remain in their homes while accessing
their home equity in order to meet emergency needs, supplement their incomes, or, in some
cases, purchase a new home – without subjecting borrowers to ongoing repayment obligations
during the life of the loan. If prudently underwritten and used appropriately, these products have
the potential to become an increasingly important product for addressing certain credit needs of
an aging population.
1

See 12 U.S.C. § 1715z-20; 24 CFR Part 206.
The Board, Federal Deposit Insurance Corporation, National Credit Union Administration, Office of the
Comptroller of the Currency, and former Office of Thrift Supervision.
3
See 75 FR 50801 (August 17, 2010).
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Reverse mortgages can present substantial risks both to financial institutions and to
consumers. As with any type of home-secured loan, it is crucial that consumers understand the
product terms and the nature of their obligations. In addition to consumer financial protection
concerns that raise corresponding financial institution compliance and reputation risks, reverse
mortgage products may present other risks, such as credit, interest rate, and liquidity risks,
especially for proprietary reverse mortgage products lacking the insurance offered under the
federal HECM program.
The 2010 reverse mortgage guidance is designed to help financial institutions ensure that
their risk management and consumer financial protection practices adequately address the
compliance and reputation risks raised by reverse mortgage lending. The guidance discusses the
general features of reverse mortgage products, relevant legal requirements, and consumer
financial protection concerns raised by reverse mortgages. The guidance focuses on the need for
banks, thrifts, and credit unions to provide clear and balanced information to consumers about the
risks and benefits of these products.
Both proprietary products and HECMs are subject to various laws governing mortgage
lending including the Federal Trade Commission Act, RESPA, TILA, and fair lending laws.
HECMs are also subject to an extensive regulatory regime established by HUD, including
provisions for FHA insurance of HECM loans that protect both lenders and reverse mortgage
borrowers. The guidance supplements those requirements by advising lenders about additional
practices that should be implemented to manage the risks associated with reverse mortgage
products.
This information is not available from other sources.
Description of Information Collection
The guidance describes reporting, recordkeeping, and disclosures for both proprietary and
HECM reverse mortgages. A number of these disclosures are “usual and customary” business
practices for proprietary and HECM reverse mortgages, and these would not meet the PRA’s
definition of “burden.” Other included disclosure requirements are currently mandated by
federal consumer financial protection laws and regulations for all reverse mortgage loans and
information collections required by HUD’s rules for HECM loans.4 Discussion of these
requirements in the guidance is also not considered additional paperwork burden imposed by the
guidance.
Proprietary reverse mortgage products, however, are not subject to HUD’s rules for
HECM loans. To the extent that the interagency guidance encourages lenders to follow HECM
requirements for proprietary loans, this would meet the PRA’s definition of paperwork burden.
There are additional provisions in the guidance that apply to both proprietary and HECM
reverse mortgages that do not meet the “usual and customary” standard, are not covered by
already approved information collections and, therefore, likewise meet the PRA’s definition of
paperwork burden.
4

See OMB No. 2502-0524.

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Proprietary Reverse Mortgages
Financial institutions offering proprietary reverse mortgages are encouraged under the
guidance to follow or adopt relevant HECM requirements for mandatory counseling, disclosures,
affordable origination fees, restrictions on cross-selling of ancillary products, and reliable
appraisals.
Proprietary and HECM Reverse Mortgages
Financial institutions offering either proprietary or HECM reverse mortgages are
encouraged to develop clear and balanced product descriptions and make them available to
consumers shopping for a mortgage. They should describe how disbursements can be received
and include timely information to supplement TILA and other mandated disclosures. Promotional
materials and product descriptions should include information about the costs, terms, features,
and risks of reverse mortgage products.
Financial institutions should adopt policies and procedures that prohibit directing a
consumer to a particular counseling agency or contacting a counselor on the consumer’s behalf.
They should adopt clear written policies and establish internal controls specifying that neither the
lender nor any broker will require the borrower to purchase any other product from the lender in
order to obtain the mortgage. Policies should be clear so that originators do not have an
inappropriate incentive to sell other products that appear linked to the granting of a mortgage.
Legal and compliance reviews should include oversight of compensation programs so that
lending personnel are not improperly encouraged to direct consumers to particular products.
Financial institutions making, purchasing, or servicing reverse mortgages through a third
party should conduct due diligence and establish criteria for third-party relationships and
compensation. They should set requirements for agreements and establish systems to monitor
compliance with the agreement and applicable laws and regulations. They should also take
corrective action if a third party fails to comply. Third-party relationships should be structured in
a way that does not conflict with RESPA.
Respondent Panel
The FR 4029 panel comprises state member banks that originate proprietary reverse
mortgages.
Time Schedule for Information Collection
Financial institutions are encouraged to maintain records for any proprietary or HECM
reverse mortgages that they offer.5

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Financial institutions are encouraged to maintain a copy of these records until the guidance is either superseded or
rescinded. If the guidance is rescinded, financial institutions are encouraged to maintain one copy of the records for
10 years after recension.

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Public Availability of Data
Certain data related to this information collection are available to the public in the form
of lenders’ marketing and other promotional materials, product descriptions, and disclosures.
Legal Status
The information collection is authorized pursuant to the Board’s examination authority,
which is located in section 11 of the Federal Reserve Act for state member banks (12 U.S.C. §
248).6 The guidance is voluntary.
Because the documentation encouraged by the guidance is maintained by each institution,
the Freedom of Information Act (FOIA) would only be implicated if the Board obtained such
records as part of the examination or supervision of a banking organization. In the event the
records are obtained by the Board as part of the examination or supervision of a financial
institution, this information would be considered confidential pursuant to exemption 8 of the
FOIA, which protects information contained in “examination, operating, or condition reports”
obtained in the bank supervisory process (5 U.S.C. § 552(b)(8)). In addition, the information
may also be kept confidential under exemption 4 of the FOIA, which protects trade secrets and
commercial or financial information that is both customarily and actually treated as private by
the respondent (5 U.S.C. § 552(b)(4)).
Consultation Outside the Agency
There has been no consultation outside of the Federal Reserve System.
Public Comments
On February 17, 2021, the Board published an initial notice in the Federal Register (86
FR 9940) requesting public comment for 60 days on the extension, without revision, of the
FR 4029. The comment period for this notice expired on April 19, 2021. The Board did not
receive any comments. The Board adopted the extension, without revision, of the FR 4029 as
originally proposed. On May 26, 2021, the Board published a final notice in the Federal Register
(86 FR 28350).
Estimate of Respondent Burden
As shown in the table below, the estimated total annual burden for the FR 4029 is 96
hours. National Information Center (NIC) data was used to determine the relevant subset of
6

Although there is no information indicating that Federal Reserve-supervised financial institutions other than state
member banks originate reverse mortgage loans, this collection would be authorized by sections 25 and 25A of the
Federal Reserve Act (12 U.S.C. §§ 602 and 625) for Edge Act and agreement corporations, section 5 of the Bank
Holding Company Act of 1956 (12 U.S.C. § 1844) for bank holding companies, and in conjunction with section 8 of
the International Banking Act of 1978 (12 U.S.C. § 3106) for foreign banking organizations. The information
collection would be authorized by the examination authority in section 7(c) of the International Banking Act of 1978
(12 U.S.C. § 3105(c)) for branches and agencies of foreign banks and by section 10 of the H ome Owners’ Loan Act
(12 U.S.C. § 1467a) for savings and loan holding companies.

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impacted state member banks. Consolidated Reports of Condition and Income (Call Reports)
(FFIEC 031, FFIEC 041, and FFIEC 051; OMB No. 7100-0036) were used to determine which
institutions offered proprietary and HECM reverse mortgages. These recordkeeping provisions
represent less than 1 percent of the Board’s total paperwork burden.
Estimated
Estimated
Estimated
Annual
number of
average hours annual burden
frequency
respondents7
per response
hours

FR 4029
Implementation of policies and
procedures
Review and maintenance of
policies and procedures

1

1

40

40

7

1

8

56

Total

96

The estimated total annual cost to the public for the FR 4029 is $5,678.8
Sensitive Questions
This collection of information contains no questions of a sensitive nature, as defined by
OMB guidelines.
Estimate of Cost to the Federal Reserve System
The estimated cost to the Federal Reserve System for this information collection is
negligible.

7

Of these respondents, none for Implementation of policy and procedures and 1 for Review and maintenance of policies
and procedures are considered small entities as defined by the Small Business Administration (i.e., entities with less than
$600 million in total assets), https://www.sba.gov/document/support--table-size-standards.
8
Total cost to the public was estimated using the following formula: percent of staff time, multiplied by annual
burden hours, multiplied by hourly rates (30% Office & Administrative Support at $20, 45% Financial Managers at
$73, 15% Lawyers at $72, and 10% Chief Executives at $95). Hourly rates for each occupational group are the
(rounded) mean hourly wages from the Bureau of Labor and Statistics (BLS), Occupational Employment and Wages
May 2020, published March 31, 2021, http://www.bls.gov/news.release/ocwage.t01.htm. Occupations are defined
using the BLS Standard Occupational Classification System, http://www.bls.gov/soc/.

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