The issue of insurance sales representatives persuading older consumers to take out reverse mortgages and then put the proceeds or other assets into annuities came up at a congressional hearing last week.
Lawmakers, consumer and interest group representatives talked about the issue during a hearing on reverse mortgages organized by the Senate Special Committee on Aging.
Sen. Claire McCaskill, D-Mo., who chaired the hearing, said older consumers have long been targets of predatory lending, including in the reverse mortgage market.
“Seniors who have worked their entire lives to be able to enjoy retirement should not be victimized by people out to make a buck,” McCaskill said in a statement. “We need to have adequate protections in place to ensure only those who would benefit from a reverse mortgage qualify.”
Sen. Herbert Kohl, D-Wis., suggested that problems with marketing of reverse mortgages might be connected with annuity marketing problems.
“Some salesmen are…convincing seniors to swallow this double-dose of bad financial advice: Take the cash from a reverse mortgage and use it to fund an unsuitable annuity,” Kohl said, according to a written version of his remarks.
“As this committee determined at our Sept. 5 hearing, long-term annuities are almost always inappropriate for seniors, as they can tie up retirement savings far beyond one’s life expectancy,” Kohl said.
Carol Anthony, a King City, Calif., resident accused a sales representative of selling her own mother a reverse mortgage and shifting money into an unsuitable annuity, from a bond fund, in separate transactions
“The municipal bonds had been paying mom a nice monthly income,” Anthony testified at the hearing, according to a written version of her remarks. “Now, she would have to wait until her 100th birthday to see a cent of her money.”
Later, “I was able to buy back her house and amicably settle the annuity issue,” Anthony said.