Legislation overwhelmingly passed by the House on July 23 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 provides a government backstop to the ailing Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae).
It also strengthens 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 after press time.
Banks, led by lobbyists for the American Bankers Association, and insurance companies, 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, including the annuities which provide income for life that are increasing in popularity, and long term care insurance.
It would require the 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.