Update 5-24-16:
Unreal Engine has just released update 4.12. In the list of fixes, it appears that the issue with the morph target in this video has been fixed!
Here is the exact wording from their website:
"Fixed! UE-30619 Face Distortion In Morph Targets Sample"
https://forums.unrealengine.com/showthread.php?108495-Unreal-Engine-4-12-Preview&p=535451&viewfull=1#post535451
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Faceshift Motion Capture to Unreal Engine 4 Tutorial | NatokHD