April 2008
Watch out for sneaky sales tactics
Consumer advocates and lawmakers are concerned about reports of high-pressure sales tactics aimed at elderly homeowners to
persuade them to take out reverse mortgages and use the proceeds to buy annuities, long-term-care insurance, and other financial
products.
"We are now seeing insurance brokers actively recruiting insurance agents to promote reverse mortgages at senior centers," said Prescott Cole, speaking for CEASE, the Coalition to End Elder Financial Abuse, in testimony before the Senate Special Committee on Aging in December 2007. "Some brokers are even offering to help insurance agents become HUD-certified counselors. They are instructing the agents that they can ethically get the senior to pull out home equity in order to buy insurance products."
Mary Munoz knows the dangers of reverse mortgages. The 80-year-old Los Angeles woman says she was pressured by a lender into taking out a $209,000 reverse mortgage on her ranch house and then using the money to buy two annuities totaling $80,000, the larger of which had a 20 percent penalty for withdrawals during the first 10 years.
"She didn't need the reverse mortgage or the annuity," says Ingrid Evans, her San Francisco-based attorney "She just wanted a little cash to fix her porch." Munoz is suing the lender in what Evans hopes will become class-action litigation.
AARP warns older homeowners against taking a reverse mortgage to get money to invest. "It is extremely unlikely that you can safely earn more from an investment than the loan would cost," the group says in its online guide to reverse mortgages.
"We are now seeing insurance brokers actively recruiting insurance agents to promote reverse mortgages at senior centers," said Prescott Cole, speaking for CEASE, the Coalition to End Elder Financial Abuse, in testimony before the Senate Special Committee on Aging in December 2007. "Some brokers are even offering to help insurance agents become HUD-certified counselors. They are instructing the agents that they can ethically get the senior to pull out home equity in order to buy insurance products."
Mary Munoz knows the dangers of reverse mortgages. The 80-year-old Los Angeles woman says she was pressured by a lender into taking out a $209,000 reverse mortgage on her ranch house and then using the money to buy two annuities totaling $80,000, the larger of which had a 20 percent penalty for withdrawals during the first 10 years.
"She didn't need the reverse mortgage or the annuity," says Ingrid Evans, her San Francisco-based attorney "She just wanted a little cash to fix her porch." Munoz is suing the lender in what Evans hopes will become class-action litigation.
AARP warns older homeowners against taking a reverse mortgage to get money to invest. "It is extremely unlikely that you can safely earn more from an investment than the loan would cost," the group says in its online guide to reverse mortgages.
