Watch-Out for Any Annuity Pitch that is Tied to a Reverse Mortgage

The cross-selling of annuities and reverse mortgages is problematic to say the least.  There is clear potential for conflict of interest and pitfalls for elderly customers.

Consumers should be on the look-out for any sales pitch that ties the two products together.

There are, in fact, laws that define the need for separation of the two products during the marketing and sales process:

Under the Housing and Economic Recovery Act of 2008, a lender or anyone else can’t require a HECM (a reverse mortgage) borrower to purchase insurance, an annuity or similar product as a condition of obtaining the HECM.

Plus, a lender can’t be associated with any other financial or insurance product. If he or she is, firewalls and other safeguards must be maintained to ensure that employees originating HECMs don’t also sell other financial products.  
HUD is developing regulations to implement these provisions.

Inappropriate or "unsuitable" annuity sales that are associated with reverse mortgages have been on the rise.

Source: Financial Advisor Magazine

Full Story

Key Phrases: