A house bill passed by the Senate includes a section that could prevent originators of some government-backed reverse mortgages from selling insurance products.

Sen. Claire McCaskill, D-Mo., requested the addition of the provision, Section 2122, to the Senate version of H.R. 3221.

Members of the Senate voted to approve H.R. 3221 last week.

The insurance products covered by Section 2122 are life insurance, annuities and long-term care insurance.

The provision would require the banks and mortgage companies that originate reverse mortgages for seniors to hire third-party agents to sell insurance, or to use firewalls and other safeguards to insure that the reverse mortgage originators have no incentive to sell the seniors insurance.

The House version of H.R. 3221 has a different insurance provision, Section 219.

At this point, the House insurance provision appears to be far less restrictive and far more acceptable to the insurance industry than the Senate provision, according to Maurice Perkins, a vice president at the American Council of Life Insurers, Washington.

“We don’t oppose anti-tying provisions, meaning that sale of one product is tied to another,” Perkins said. “But what we have here is something entirely different. This is basically a blanket prohibition.”

Section 2122 in the Senate bill concerns sales of reverse mortgages that will be insured by the Federal Housing Administration.

In 2007, regulators testified at a Senate hearing that some lenders had tied access to reverse mortgages to sales of life insurance.

In December 2007, McCaskill responded by introducing a bill that would have restricted links between sales of reverse mortgages and sales of insurance.

Perkins says the language in McCaskill’s bill was acceptable to the insurance industry.

During the drafting process of Section 2122, which is based on McCaskill’s bill, the language was more restrictive in a way that made the provision unsatisfactory to the insurance industry, Perkins says.

“Our primary concern with Section 2122 is that it will have the effect of prohibiting under all but the most limited circumstances sale of insurance products by anyone associated with the origination” of a reverse mortgage insured by the FHA, Perkins says. “This obviously would affect agents. It will also have an impact on banks, the groups which are distributing our products. We worked with a lot of Senate offices on this, and we are currently working with House Financial Services Committee staffers on this.”

In the section takes effect as written, “that would impose a burden on the senior to have to find a new financial advisor in order to purchase a product they might consider crucial to their financial security,” Perkins says.