Legislation overwhelmingly passed by the House Wednesday would in most cases bar banks that sell reverse mortgages backed by the government from selling insurance products to the same customers.
The provision is contained in H.R. 3221, a housing bill that would provide a government backstop to the ailing Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae).
It would also strengthen oversight of Freddie and Fannie and potentially allows up to 300,000 homeowners faced with foreclosure to refinance under favorable terms through the Federal Housing Administration.
The bill passed the House 272-152 and was expected to be passed by the Senate.
Banks, led by lobbyists for the American Bankers Association, and insurers, led by lobbyists for the American Council of Life Insurers, sought to soften the language–which was contained in the Senate version of the bill–but failed.
The insurance products involved are life insurance, annuities and long term care insurance.
It would require banks and mortgage companies that originate reverse mortgages to hire third-party agents to sell insurance products to the seniors who refinance with reverse mortgages they originate.
The provision deals with sale of reverse mortgages that will be insured by the Federal Housing Administration.
It was added at the request of Sen. Claire McCaskill, D-Miss., who introduced a similar bill last December in response to a hearing where regulators complained problems faced by seniors who have reverse mortgages they allege were tied to sales of life insurance.
After the bill passed the House, the ACLI released a statement acknowledging that it “would effectively prohibit under all but the most limited circumstances” the sale of insurance products by anyone associated with the origination of a reverse mortgage.
“While we support strong laws and regulations that protect seniors from being mislead in connection with reverse mortgages, we should not make it difficult for them to get the products that they may want and need,” the ACLI statement said. “We’ll be working with HUD as it develops regulations [to implement the provision].”
“The senate provision is overkill, in our opinion,” said Kevin McKechnie, a lobbyist for the American Bankers Insurance Association, because it “imposes 2 different firewall regimes.”