From the October 2009 Issue of Senior Market Advisor Magazine
Reverse mortgages are growing in popularity, no surprise given retiree worries about their future retirement income. But regulators are now expressing concern that financial advisors may be encouraging clients to purchase unsuitable financial products using reverse mortgage proceeds.
But change may be in the offing. Under the Housing and Economic Recovery Act of 2008, a mortgage lender or anyone else is not allowed to require consumers to purchase any kind of financial product as a condition of getting a reverse mortgage. If the lender provides other types of products, it must maintain firewalls and other safeguards so that employees who originate reverse mortgages don’t also sell other financial products.
What’s more, some experts believe that HERA may limit financial advisors from receiving direct compensation from the reverse mortgage transaction.
A good source of information on reverse mortgage compliance issues is the National Reverse Mortgage Lenders Association (www.nrmla online.org).